Tax Treatments Explained

Tax Treatments Explained (Payee Master File)

Brett Reed

Jan 16, 2024

1266

The Tax Treatment and relationship to the Income Stream Type is automatically determined by how the payee is configured.

Using the Australian Taxation Office provided formulas, tax calculations are automatically performed based on the tax schedules. Factoring in the payee's tax treatment and pay types results in streamlined and accurate tax calculations that save time and eliminate errors.

When processing a pay run, amounts are allocated to Income Stream Types such as Salary and Wages, Closely Held employees, Working Holiday Makers, Foreign Employment Income and others. Country codes may be applicable, and multiple income types can be reported for the same payee throughout the year without adding the same payee multiple times.

Regular (available since initial release)

Regular is applicable when the Payee is not otherwise covered by another tax table, including directors, office holders, religious practitioners, labour-hire workers and Pacific Labour Scheme workers. This Tax Treatment is available when the Payee is An Australian resident for tax purposes and has provided a valid Tax File Number or 111-111-111 or 333-333-333.

Regular Payees can be paid as any of the following Income Streams:

Seniors and Pensioners (available since initial release)

Seniors and Pensioners is applicable when the Payee is 66 years of age or older or where the Payee is a veteran receiving a service pension and/or war widows/widowers receiving an income support supplement from the Department of Veterans’ Affairs, they must be at least 60 years of age. This Tax Treatment is available when the Payee is An Australian resident for tax purposes and has provided a valid Tax File Number or 444-444-444. Either the Withholding Declaration (NAT 3093) or Withholding declaration – short version for Seniors and Pensioners (NAT 5072) should be obtained to confirm this Tax Treatment is applicable.

Seniors and Pensioners can be paid as any of the following Income Streams:

No TFN (available since initial release)

No TFN is applicable when the Payee has not supplied a Tax File Number or has previously supplied 111-111-111 or 333-333-333 where the relevant period has now ended. This does not include Payees hired under the Seasonal Worker Programme. This Tax Treatment is available when the Payee is either An Australian resident for tax purposes or A Foreign resident for tax purposes and is using Exemption Tax File Number 000-000-000 as they have not provided a Tax File Number within the relevant timeframe.

A No TFN Payee can be paid as any of the following Income Streams:

Working Holiday Maker (available since initial release)

Working Holiday Maker is applicable when the Payee is working in Australia under Visa subclass 417 or 462 or other bridging visa arrangements. This Tax Treatment is available when the Payee is A Working Holiday Maker and has provided a valid Tax File Number or 000-000-000 or 111-111-111.

A Working Holiday Maker Payee can only be paid as an Income Stream Working Holiday Maker.

Foreign Resident (available from Version 2.30)

Foreign Resident is applicable when the Payee selected A Foreign resident for tax purposes in either the Tax File Number Declaration (NAT 3092) or Withholding declaration (NAT 3093). This excludes Payees who are covered by specific tax tables such as Horticulturists and Shearers, Working Holiday Makers or Seasonal Worker Programmes. This Tax Treatment is available when the Payee is A Foreign resident for tax purposes and has provided a valid Tax File Number or 111-111-111.

Foreign Resident Payees can be paid as any of the following Income Streams:

Seasonal Worker Programme (available from Version 2.30)

Seasonal Worker Programme is applicable when the Payee is a Foreign resident for tax purposes engaged under the SWP administered by the Department of Employment, Skills, Small and Family Business. Some Payees may be exempt from having tax withheld from their payments if they are from PNG or Kiribati and in Australia for 90 days or less within the financial year.

Seasonal Worker Programme Payees do not have to provide a TFN to their payer for these tax arrangements to apply and can only be paid as Income Stream Seasonal Worker Programme.

Horticulturists and Shearers (available from Version 2.30)

Horticulturists and Shearers is applicable when the Payee is working for a continuous period not exceeding six months in any horticultural process associated with the production, cultivation or harvest of a horticultural crop or in the shearing industry such as shearers, crutchers, wool classers, cooks, shed hands and pressers. This excludes workers covered by another tax table, such as for Working Holiday Maker and Seasonal Worker Programme, but includes Foreign Residents. This Tax Treatment is available when the Payee is either An Australian resident for tax purposes or A Foreign resident for tax purposes and has provided a valid Tax File Number or 111-111-111. A Horticulturists and Shearers Payee can be paid as any of the following Income Streams:

Actors (Future Release)

Actors is applicable when the Payee is An Australian resident for tax purposes who have provided a valid Tax File Number or using a relevant Exemption Tax File Number per the Tax File Number Declaration (NAT 3092) and is considered to be an actor, variety artist and other entertainers who receive payments for their performances. It includes Payees' performing promotional activities.

Actors Payees can be paid as any of the following Income Streams:

Voluntary Agreement (Future Release)

Voluntary Agreement is applicable when the Payee is a contractor under a voluntary agreement to withhold under section 12-55 of Schedule 1, Part 2-5 of the TAA 1953, including those who have informed the payer of their CIR, that they don’t have a CIR and if the payment includes an amount for GST.

A Voluntary Agreement Payee can only be paid as Income Stream Voluntary Agreement.

ATO-Defined (Future Release)

ATO-Defined is applicable when the ATO issues a written notice to the payer to vary the PAYGW downwards (for gross income or specific payments only) for the payee; the payee is a death beneficiary (who is not also an employee) or the payee is not covered by any other tax table, such as for a non-employee for superannuation guarantee purposes only.

ATO-Defined Payees can be paid as any of the following Income Streams: