Salary and Wages PAYG Shortfall

Many taxpayers will owe tax in July 2016, instead of receive a refund.

It is likely this financial year that there will be an extra pay period.

  • fortnightly – will have 27 pay days for the year instead of the usual 26
  • weekly – will have 53 pay days for the year instead of the usual 52

The withholding tax tables calculated by the Australian Taxation Office are based on the normal number of pays in a year.  Tax rates increase as a taxable income increase.  Therefore, the additional pay day will mean that amounts withheld from salary or wage payments made to many payees will not cover the amount payable when they lodge their tax returns.

What can be done?

The Australian Taxation Office recommends that additional amounts can be withheld.

Every taxpayer’s circumstances are different, but those who normally expect to receive a small refund at the end of the year are likely to find that they owe tax, because of the additional pay day.  Any payees concerned about the possible shortfall in amounts withheld, can request additional amounts.  The recommendations are:-

Weekly earnings / Additional withholding per pay

$725 to $1,524 / $3

$1,525 to $3,449 / $4

$3,450 and over / $10

Fortnightlyearnings / Additional withholding per pay

$1,400 to $3,049 / $12

$3,050 to $6,799 / $17

$6,800 and over / $42

An email request to the pay office should be enough.  But don’t wait too long!

If you think this difference would be insignificant, then think again!  An average taxpayer earning $3,200 per fortnight will be $482 out of pocket, when they lodge their 2016 income tax return.

For a normal, 26 fortnight year, the taxpayer would receive a refund of $41 on assessment of their tax return.  In a 27 fortnight year, they would face a bill of $421, which would be the tax payable on assessment.

This example uses 2015-16 tax rates.  It assumes the payee has no other income or deductions and is not entitled to leave loading.

Speak to the pay office immediately!

Source:  Written for AcctWeb by a Melbourne accounting practice

Cristy Houghton

Embarketing, 48 Johnston Street, Wagga Wagga, NSW, 2650

Cristy's unique career has taken her from country NSW to the city lights of Clarendon Street South Melbourne and back again. With an early career in radio as a copywriter and creative strategist, she is now a Jill of all trades as a graphic designer, website builder, blog writer, video editor, social media manager, marketing strategist and more. 

In fact, give her any task and this chick will figure out how to do it! Go on, we dare you!

No, really, we DARE you!!

Cristy has won two Australian Commercial Radio Awards (ACRAs) for Best Ad and Best Sales Promotion, and even has an 'Employee of the Year' certificate with her name on it.

Cristy and her husband James have traveled extensively through Russia, China and South East Asia, and have two fur-babies, Sooty (cat) and Panda (puppy). Cristy loves drinking coffee, meeting people to drink coffee, coffee tasting and coffee flavoured cocktails. She also enjoys road trips, TED Talks and watching cat videos on youtube.