Tax file number declarations
The answers your employees provide on their Tax file number (TFN) declaration determine the amount you need to withhold from their payments. A Tax file number declaration applies to any payments made after you receive the declaration. If you receive an updated declaration from an employee, it will override the previous one.
If an employee doesn't give you a valid Tax file number declaration within 14 days of starting an employer/employee relationship, you must complete a Tax file number declaration with all available details of the employee and send it to us.
When a TFN hasn't been provided
You must withhold 47% from any payment you make to a resident employee and 45% from a foreign resident employee, (ignoring any cents) if all of the following apply:
- They have not quoted their TFN.
- They have not claimed an exemption from quoting their TFN.
- They have not advised you that they have applied for a TFN or have made an enquiry with us.
If an employee states at question 1 of the Tax file number declaration they have lodged a Tax file number – application or enquiry for individuals with us, they have 28 days to provide you with their TFN.
If the employee hasn't given you their TFN within 28 days, you must withhold 47% from any payment you make to a resident employee and 45% from a foreign resident employee (ignoring any cents) unless we tell you not to.
Don't allow for any tax offsets or Medicare levy adjustments. Don't withhold any amount for study and training support loans.
When your employee is a foreign resident
If your employee has answered no to the question ‘Are you an Australian resident for tax purposes?’ on their Tax file number declaration, you will need to use the foreign resident tax rates.
There are 2 ways you can withhold from a foreign resident’s earnings:
- If they have given you a valid TFN, use scale 3.
- If they have not given you a valid TFN, use scale 4.
Foreign residents can't claim tax offsets to reduce withholding. If your foreign resident employee has claimed a tax offset on the Withholding declaration, don’t make any adjustments to the amount you withhold.
Withholding declarations
An employee may use a Withholding declaration to advise you of a tax offset they choose to claim through reduced withholding from you.
Employees can also use a Withholding declaration to advise you of any changes to their situation that may affect the amount you need to withhold from their payments.
Changes that may affect the amount you need to withhold include:
- becoming or ceasing to be an Australian resident for tax purposes
- claiming or discontinuing a claim for the tax-free threshold
- advising of a HELP, VSL, FS, SSL or AASL debt, or changes to them
- entitlement to a seniors and pensioners tax offset.
When your employee provides you with a Withholding declaration, it will take effect from the next payment you make. If you receive an updated declaration from an employee, it will replace the previous one.
An employee must have provided you with a valid Tax file number declaration before they can provide you with a Withholding declaration.
Claiming tax offsets
If your employee chooses to claim their entitlement to a tax offset through reduced withholding, they must provide you with a Withholding declaration.
To work out the employee’s annual tax offset entitlement into a weekly, fortnightly, monthly or quarterly amount, refer to Tax offsetsThis link will download a file.
Don't allow for any tax offsets if any of the following apply:
- No tax-free threshold is claimed.
- You are using foreign resident rates.
- an employee hasn't provided you with their TFN.
When your employee has a study and training support loan debt
If your employee has a HELP, VSL, FS, SSL or AASL debt, you may need to withhold additional amounts from their payments. Your employee will need to notify you of this on their Tax file number declaration or Withholding declaration.
Calculating additional withholding amounts
To calculate additional withholding amounts for:
- HELP, VSL, FS, SSL or AASL debts, refer to either
- Statement of formulas, refer to Schedule 8 – Statement of formulas for calculating study and training support loans components.
Employees who are entitled to a reduction of Medicare levy, or don't have to pay the Medicare levy because of low family income, won't have to make a compulsory HELP, VSL, FS, SSL or AASL repayment for that year. The exemption from making a compulsory study and training support loans repayment may be claimed on the Medicare levy variation declaration.