PAYG withholding variation application

Why vary or reduce withholding amounts

The main purpose of varying or reducing the amount of pay as you go (PAYG) withholding is to make sure that the amount of tax withheld during the income year best meets your end-of-year tax liability. For example, you may want to apply for a variation if the normal rate of withholding leads to a large credit at the end of the income year because your tax-deductible expenses are higher than normal.

You can lodge your application during the year. The last date for lodgment is 30 April of the application year. This application is valid for one financial year. If you apply in May or June, the variation will apply to the financial year starting from 1 July.

Processing times

The processing time for an application depends on the method used to lodge your application. If you lodge:

• online – processing is within 28 days
• by paper – processing is within 56 days.

How to lodge

We have made changes to the way you lodge online.

To lodge online for individuals, go to myGov and select:

• ATO
• Tax
• Manage
• PAYG withholding variation.

To lodge online for tax agents, go to Online services for tax agents and select:

• Lodgments
• Client forms
• PAYG withholding variation.

If you cannot lodge online, you will need to order a paper application by either:

• visiting online orderingExternal Link and searching for NAT 2036
• phoning our automated self-help ordering service on 13 28 65 and asking for the NAT number you need.

Important information

We will process your application only if you:

• have lodged all required tax returns and activity statements, or notified us in writing if you were not required to lodge tax returns in prior years
• did not receive a debit assessment on your last tax assessment (if you also had an approved withholding variation for that year)
• do not have any outstanding tax debt owing to the Australian Government
• do not have any outstanding debts under any other Acts administered by us.

We may seek more information from you before or after your application is processed. If you fail to provide this, your application may not be approved.

We process your application based on the information you provide. It is your responsibility to make sure this information is adequate to allow us to calculate a withholding rate to meet your end-of-year tax liability.

If you are granted a variation, this does not mean we have accepted the tax treatment of the income and deductions on your application. Your actual tax liability will be determined after you lodge your tax return.

For more information, you can phone us on 1300 360 221. If you are a tax agent, phone 13 72 86, Fast Key Code 1 2 3 between 8:00 am and 6:00 pm Monday to Friday.

Aggressive tax planning

In the past, promoters of managed investment schemes, and tax-effective investment products or arrangements, have encouraged their clients to apply for withholding variations to produce immediate tax savings.

Promoters often imply that the granting of a variation supports the tax deductibility of the investment and indicates our acceptance that the arrangement complies with the relevant income tax laws.

If you want more certainty about the tax treatment of an arrangement, ask the promoter if they have a product ruling from us.

If the answer is:

• yes – ask for a copy and read it, or have an independent tax professional read it and explain how it applies to you
• no – ask why they don't have a product ruling for the project and apply to us for a private binding ruling or consult a tax professional who is not involved in promoting the investment.

If you have concerns about a promoter or a tax scheme, report it by:

• making a tip-off using the tip-off form – the form is also available in the 'Contact us' section in the ATO app
• phoning 1800 060 062
• writing to us – mark all letters 'in confidence' and post to
  
  Australian Taxation Office
  Tax Integrity Centre
  Locked Bag 6050
  DANDENONG  VIC  3175.

If you do not speak English well and want to talk to us, phone the Translating and Interpreting Service (TIS) on 13 14 50 for help with your call.

Tax professionals can provide information by calling 13 72 86 (Fast Key Code 3 4).

Remember to make note of the reference number when you submit your tip-off form. You will need to quote it if you want to add any information later.

Your privacy

Your privacy is protected by the Privacy Act 1988 and the strict secrecy provisions of the Income Tax Assessment Act 1936, the Taxation Administration Act 1953 and other tax laws. You can also view our privacy policy, as well as information on protections available for tax whistleblowers and your privacy if you make a tip-off.

Non-commercial losses

If you have a net loss from a business activity you carry on as an individual, either as a sole trader or in partnership, the non-commercial loss rules will apply.

These rules determine if you can use your business loss to offset income from other sources. You can only offset your loss against assessable income from other sources if one or more of the following applies:

• you meet one of the exceptions for primary production or professional arts businesses
• you meet the income requirement and satisfy one of the four tests (profits test, assessable income test, other assets test or real property test)
• we have exercised our discretion to allow you to claim the loss.

If you do not satisfy the above criteria, you must defer the loss to a future year when both of the following apply:

• the business activity is continuing
• you meet the income requirement and satisfy one of the tests (profits test, assessable income test, other assets test or real property test).

Working holiday makers

PAYG withholding is applied at a rate of 15% for working holiday makers (WHM). If you think too much tax has been withheld for the year, you'll need to lodge a tax return to receive a refund if eligible.

If you think too much tax is being withheld for you, may want to apply for a variation.

If you are a WHM who is both an Australian resident for tax purposes and from a non-discrimination article (NDA) country, you can seek a PAYG variation.

To do this you need to show evidence that you:

• are from an NDA country
• have been treated by the Commissioner of Taxation as being an Australian resident for tax purposes in one of the following ways
  • being assessed, following the lodgment of your tax return, as a resident on the same basis as a resident Australian citizen for one of the 2 most recent income years
  • quoting the authorisation number of a relevant private ruling.
   

The PAYG variation process is not a pathway to determine your residency status. If you would like help to determine your residency status you can apply for a private ruling.

Processing your PAYG withholding variation application for WHMs

To be able to process your PAYG withholding variation application you will need to include the following when lodging:

• select reason code 12A2 other reasons – excess withholding
• in the free text field input WHM and information about your residency. For example, ‘residency based on prior income tax assessment' or input ‘private ruling’ and provide the authorisation number.

If you change employers, you will need to complete a new PAYG withholding variation application. This is because the variation only applies to the income from that particular employer for the financial year.

Starting and finishing dates

If your application is approved, the varied or reduced amount of withholding will start from the next available pay day after your pay office receives the notice of withholding variation from us.

Your variation finishes on the date shown on the letter you receive from us. To continue to have varied or reduced tax withheld from payments after this date, you must lodge another variation application – at least 6 weeks before the expiry date.

You can also phone us on 1300 360 221. If you are a tax agent, phone 13 72 86, Fast Key Code 1 2 3 between 8:00 am and 6:00 pm Monday to Friday.

Common errors to avoid when completing your application

When not to use this application

Don't complete the PAYG withholding variation application if you want to vary your instalment payments. This application only applies to varying amounts withheld on income paid to you by your payer.

You also can't apply for a PAYG withholding variation if you still have an outstanding Study and training support loan (STSL) debt and are claiming:

• STSL overpayments at the commencement of a financial year
• that you have fully repaid your STSL debt.

Common errors

The following are common errors to avoid when completing your application:

• Payer’s ABN
  • including spaces in your payer’s ABN when completing the online form. Enter the ABN without spaces.
   
• Annual income payments
  • not including all annual income you expect to receive from all payers for the full financial year, not just the payer you want the variation to apply to
  • not providing the correct or most recent gross and tax payment amounts
  • incorrectly including year to date gross or tax amounts when completing the application before the commencement of the applicable financial year.
   
• Tax offsets
  • incorrectly claiming deductions as a tax offset
  • incorrectly claiming a tax offset for income payments that a tax offset does not apply to.
   
• Other income payment types
  • entering ‘0’ at income payment fields that you don’t receive from your payer The field is to be left blank
  • not including a description if you include an amount at Other income payment types.
   
• Rental details
  • not listing all owned rental properties (the online form states to enter at least one rental property but all rental properties need to be provided)
  • incorrectly completing or not providing the following details
    • date you purchased the property
    • is the property under construction
    • percentage owned
    • year building constructed.
     
   

Instructions for your variation application

The following instructions will help you complete your application:

• Section A: Your details
• Section B: Payer details
• Section C: Rental details
• Section D: Investment details
• Section E: Annual income and tax offsets
• Section F: Annual deductions

Section A: Your details

A1 Tax file number (TFN)

If you choose not to provide your TFN, your application may be delayed.

A7 Authorised contact person

By completing this item you are authorising us to deal with this person as the first point of contact.

A8 Australian resident for tax purposes

Select your correct residency status. If you are unsure of your residency status or if you need more information:

• refer to Work out your tax residency
• phone us on 13 28 61.

A10 Reason codes

There is a list of reason codes on page 2 of the PAYG withholding variation application.

It is important to use the correct reason code. If your reason code begins with 05, you must select only one code. If your reason code begins in the range 08–17, you can select more than one code within these ranges – for example, 2 or more payers 11A0 and Negative gearing 08A0.

Section B Payer details

If your reason code begins in the range 05, you need to only complete B12 and B13. If your reason code begins in the range 08 to 17, you need to complete all applicable fields in B1 to B13. If you have more than 2 payers, attach a separate page with the required details.

B2 Australian business number (ABN)

The implementation of your variation may be delayed if you do not provide a correct ABN.

B3 Payer name

Provide your payer's business name.

B4 Will you be receiving payments from this payer for the full year?

If you will be receiving income from this payer for the full year, select Yes.

If you will be receiving payments from this payer for part of the year, select No. Include the total income received and tax withheld to date for your current and all previous payers at B12 and B13.

B5 Pay office postal address

Provide your payer's pay office postal address.

B6 Pay office direct phone number

Provide your pay office phone number.

B7 Payroll ID, payee ID or policy number

Provide your payroll ID, payee ID or policy number. Your payer uses this information for identity purposes.

B8 Gross per pay

Provide the amount you are receiving each pay before tax is withheld.

B9 Tax withheld per pay

Provide the amount of tax your payer is withholding from each pay.

B10 Pay frequency

Select the applicable box to indicate how often you are paid

B11 Dates of last pay and next pay

Provide the date you were last paid and the date you next expect to be paid.

B12 Gross pay received since 1 July

Provide the total amount of gross payments you have received from current and all previous payers since 1 July of the application year. Include any bonus payments received.

B13 Tax withheld since 1 July

Provide the total amount of tax withheld from current and all previous payers since 1 July of the application year. Include tax withheld from any bonus payments. Do not include foreign tax paid.

Section C Rental details

Provide details for each property you own even if you have applied for a withholding variation previously. Also refer to Deductions for vacant land to see if the changes in legislation affect deductions you can claim.

Percentage owned

Joint tenants and tenants in common must divide the income and expenses in accordance with their legal interest in the property.

With joint tenancy, each tenant holds an equal interest in the property. For example, if you and your spouse are the only names listed on the title deed and you are listed as joint tenants, show 50% at the percentage owned item. A partnership agreement, either oral or in writing, cannot change this.

Section D Investment details

You must complete this section if your reason code begins in the range 09, 16 or 17. You must also declare any deductions relating to this investment at F2.

Section E Annual income and tax offsets

You must complete at least one item at E1 to E5. Your varied or reduced rate will only apply to the type of income or payment you complete at E1 to E5.

E1 Payments for work and services

Do not include any reportable fringe benefits amounts at this item – for example, salary sacrifice amounts.

Do not include payments for employment termination (ETP). Include ETP payments at E5(a) Employment termination payments.

E1(a)(iii) Bonus payments

Provide details of bonus payments. For bonus payments you have already received, then:

• include bonus payment at B12
• include tax withheld from bonus payments at B13.

For bonus payments not yet received, and you want:

• your variation to apply to your bonus payments, you must
  • enter the bonus payment amount at E1a(iii)
  • select the 'Varied rate to apply to bonuses' box at E1(a)(iii) 
   
• normal tax to be taken out of your bonus payments (that is, your new varied rate will not apply to your bonuses), you must
  • enter the bonus payment amount at E1a(iii)
  • select the 'Normal tax to be taken out of bonuses' box at E1(a)(iii)
  • include the bonus payment amount and the expected tax withheld from the bonus payments at Annual gross income and Annual tax in Payer details.
   

E4 Australian annuities and superannuation income streams

Do you receive more than $100,000 (see note), including tax-free amounts, from your combined superannuation income streams – Yes or No.

If you answered No to this question:

• If you are 60 years or over for the entire income year – only include the taxable components you expect to receive if they comprise an element that is untaxed in the fund (paid from an untaxed source). Show the amount of any tax offset that applies to this income at E13 Tax offsets.
• If you turn 60 in the income year and your income is from a taxed source – only show the taxed element of the taxable component for any benefits you expect to receive before you turn 60. If your super income stream has an element that is untaxed in the fund, show the total amount for the year.
• If you are between preservation age and under 60 for the full income year – show the total amount of the taxable components for any super income stream benefits you expect to receive from any payer(s). Show the amount of any tax offset that applies to this income at E13 Tax offsets.

If you answered Yes to this question:

From 1 July 2017, income from certain defined benefit pensions will be subject to additional income tax rules.

There are 3 components of a pension that must be taken into consideration:

• tax-free component
• taxed element of the taxable component
• untaxed element of the taxable component.

When an individual has more than one capped defined benefit income stream, the taxation consequences will be calculated based on the sum of each of the components across all income streams.

Before 1 July 2017:

• the tax-free component and taxed element of the taxable component are tax free to recipients 60 years and over
• the untaxed component is included in an individual's assessable income
• those who are 60 years and over are entitled to claim a 10% tax offset.

From 1 July 2017:

• 50% of any income in excess of the defined benefit income cap, (see note) from these combined sources will be included in the individual's assessable income to which no tax offset applies
• defined benefit income received in excess of the defined benefit income cap does not attract the offset
• the offset is capped at a maximum of 10% (see note)
• show the amount of any offset that applies to this income at E13 Tax offsets.

From 1 July 2017, where the defined benefit pension payment includes the 3 components listed above, different rules will apply when calculating the 10% offset:

• The taxed element and tax-free amount of the payment is counted towards the defined benefit income cap first.
• The untaxed element is then counted towards the defined benefit income cap. However, the tax offset is limited to 10% of the untaxed element that is counted towards the defined benefit income cap.
• Your super income stream will be paid from an untaxed source primarily because it is paid, at least in part, from a super scheme that is not subject to tax, such as a public sector super scheme. If you are not sure, check with your fund.

Note: The defined benefit income cap will be reduced where either:

• you first become entitled to concessional tax treatment for defined benefit income part-way through a financial year (for example, if you turn 60 years old during the year)
• a person becomes entitled to other defined benefit income that is not subject to concessional tax treatment (for example, death benefits and other member benefits in certain circumstances).

For more information, see Transfer balance cap – capped defined benefit income streams.

E5 Employment related payments

(a) Employment termination payments (ETP). There are different types of employment termination payments (ETPs). For more information, refer to the Employment termination payments.

If your current approved variation does not include ETP details, and you will be receiving an ETP, your payer must withhold at normal withholding rates for the ETP. For reduced withholding to apply to the ETP, you need to lodge an amended application and include the ETP details.

(b) Payment for unused annual and long service leave. For more information, refer to Withholding from unused leave payments on termination of employment.

E6 Partnership / trust income or partnership loss

If you have a partnership loss, complete Section H on the PAYG withholding variation supplement.

E7 Net income or loss from business

If you have net income or loss from business, complete Section G on the PAYG withholding variation supplement

Do not include income or losses derived from an investment in a managed investment scheme that also has a product ruling or a private binding ruling. Income from this source is to be shown at E8, E10 or E11 and the deductions at F2.

E9 Gross rent

Only include your portion of the rental income. If the title deed shows that you are only a part owner of the property, include only your share of the rent – for example, if you own 50% of the property, you should show 50% of the rent. Do not put a negative amount. Only include gross rent and claim the deduction at F3.

E14 Income tests

There are income tests for working out your eligibility to receive certain tax offsets and claim certain deductions.

To apply these income tests, we need your:

• reportable fringe benefits
• reportable employer super contributions
• exempt foreign employment income.

E15 Spouse's adjusted taxable income or rebate income

Your spouse's adjusted taxable income affects your entitlement to any dependant tax offset.

Use our Income tests calculator to work out your spouse's adjusted taxable income.

E16 Medicare

An exemption from the Medicare levy is claimable in certain circumstances. For more information, refer to Medicare levy.

Section F Annual deductions

Provide details of deductions for expenses incurred in earning your assessable income.

F1 Work-related expenses

For more information, refer to Deductions you can claim.

F2 Investment deductions

If you are claiming investment deductions, you must complete the investment details in section D. Income from the investment is to be provided at E8, E10 or E11.

F3 Expenses related to rental property

Provide only rental expenses at this item. If the title deed shows that you are only a part owner of the property, include only your share of the rental expenses – for example, if you own 50% of the property, you should show only 50% of the rental expenses. For more information, refer to Rental property expenses.

F4 Tax losses of earlier income years claimed this income year

You cannot claim a tax loss from an earlier income year if your taxable income last year was more than zero.

F5 Personal superannuation contributions (deductible)

For more information, see Individuals superannuation – home.

Complete the PAYG withholding variation application to vary the amount of PAYG withheld from income paid to you.