A Look at the Changes to Tax Withholding Amounts
Business Tax Update │September 2017
This year, the tax withholding amounts and processing have been updated. This includes the withholding on salary, trusts, business transactions, unused leave payments after termination and dividends paid to foreign residents. To help you navigate these changes to tax withholding amounts, we have complied a quick overview of each major change.
If you are unsure of your withholding obligations or are in need of advice, please speak with your Accountant.
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Withholding on salary and wages
The way tax is calculated on salary and wages has changed.
From 1 July 2017, the:
- temporary budget repair levy has been removed
- Medicare levy low-income threshold increased.
2. TFN withholding for closely held trusts
Beneficiaries need to quote their tax file number (TFN) to the trustee to avoid having amounts withheld from their payments or unpaid entitlements.
If a beneficiary doesn’t quote their TFN before a payment or entitlement occurs, the trustee must withhold from the payment or entitlement, pay the withheld amount to the ATO, and lodge an annual report with details of all withheld amounts.
3. Withholding in business transactions
Any business or organisation carrying on an enterprise should quote their Australian business number (ABN) when supplying goods or services to another enterprise. If the supplier does not quote their ABN, the general rule is that the payer must withhold 47% (from 1 July 2017) from their payment and send the withheld amount to the ATO.
4. Withholding from unused leave payments on termination of employment
Under the pay as you go (PAYG) withholding system, when an employee leaves, you may have to withhold from unused leave payments. Information on how to work out the amount to withhold from payments of unused annual and unused long service leave when an employee leaves can be found on the ATO website.
5. Withholding from dividends paid to foreign residents
If you pay dividends to a foreign resident, the unfranked component of each of those payments is subject to a final withholding tax. Information on when and how much to withhold from dividends you pay to foreign residents can be found on the ATO website.
Tip:
Businesses need to get their withholding obligations right. If you are unsure if your business is meeting its withholding requirements or are unsure how any of these changes may affect your business meeting its withholding obligations, you should speak with your tax agent or adviser.
For more information or to schedule an appointment, please contact us below or call us on 1300 627 829
Source: TaxWise 2017
