Flood levy information for employers - frequently asked questions |
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The following are frequently asked questions about PAYG withholding for the flood levy.
Do my employees pay the flood levy?Yes, employees (both resident and foreign residents) will pay the flood levy if they earn more than $50,000 in the 2011-12 income year. Do I need to withhold extra tax for the flood levy?The flood levy has been built in to the new tax tables which apply from 1 July 2011. Use the right table and your withholding will be correct. Are some employees exempt from the flood levy?If you have employees that were affected by a natural disaster they may be exempt from paying the flood levy. Employees who qualify for the exemption may complete the Flood levy exemption declaration (NAT 73797) form and provide this to you. To qualify for an exemption from paying the flood levy employees:
New tax tables for employees who are exempt from paying the flood levy are available at www.ato.gov.au/taxtables. Employers must ensure that the correct tax table is used when calculating the amount to withhold. Tax tables for regular payments incorporate the flood levy. It is not compulsory for an employee who is exempt from paying the flood levy to lodge a declaration with you as any flood levy amounts paid will be credited in your employee's 2011-12 income tax assessment. My employee qualifies for an exemption but earns a salary of $50,000 or less in 2011-12 - do they need to complete a flood levy exemption declaration?No, the flood levy only applies to employees who have a taxable income of more than $50,000. However, if your employee's wages per pay period exceed the yearly equivalent of $50,000 they must complete the flood levy exemption declaration so that the additional flood levy component is not withheld. Example: Robert earns a wage of $1,730 per fortnight (yearly salary of $45,000). However, in one fortnightly pay period he earns an additional $1,000 due to overtime. For this particular pay period the yearly equivalent salary is over $50,000 therefore the amount that is withheld includes a flood levy component. If Robert is entitled to the flood levy exemption he will need to complete the flood levy exemption declaration to ensure that no flood levy component is withheld from his wages throughout the year, irrespective of how much he earns per pay period. What do I do when I receive a flood levy exemption declaration?You must ensure that the declaration has been fully completed by your employee. Then, you must complete the 'Payer' section and file this for your records. From 1 July 2011, you must use the flood levy exemption tax tables when calculating the amounts to withhold, for example, Fortnightly tax table - flood levy exemption (NAT 1006E). If you receive a Flood levy exemption declaration during the 2011-12 year you must use the flood levy exemption tax tables from the next pay period from the time you received the completed declaration. Do NOT adjust any payments made before receiving the flood levy exemption declaration. In these circumstances your employee will be credited the amounts withheld when they lodge their 2011-12 income tax return. No TFN withholdingIf your employee has not quoted their TFN you must withhold at 46.5% from any payment made. Do NOT incorporate the flood levy in the withholding. Do I need to withhold the flood levy from lump sum payments?Yes, you must withhold the flood levy from lump sum payments made in the 2011-12 income year if the payment is more than $50,000 and is taxable income. Some lump sums, like employment termination payments (ETP) are concessionally taxed but are included in the employee's taxable income. Example: Joe, aged 30 in 2011-12, receives an ETP of $150,000 with a taxable component of $120,000 and a tax free component of $30,000. The $120,000 ETP is taxed at the concessional rate of 21.5%. No tax or flood levy is applied to the tax free portion of $30,000 as this part is not taxable. The flood levy is applied to Joe's taxable income of $120,000. Joe will pay a flood levy of $450 in addition to his normal tax:
When calculating the total withholding amount refer to Tax table for employment termination payments (NAT 70980) and Statement of formulas for calculating flood levy component (NAT 73834). What 'lump sum payments' are included when calculating withholding for the flood levy?Any lump sum payment that has a taxable component of more that $50,000 is included in the calculation of the flood levy. Withholding for the flood levy will apply on a 'per payment' basis. Payers must add all taxable components of lump sums paid to an individual on the one date, if the total payment is greater than $50,000 the flood levy is payable. There is no requirement for a payer to keep a cumulative total of lump sum payments made for an individual on separate dates in the 2011-12 income year. A single payment may include several different amounts, including amounts for an ETP, unused long service leave and unused annual leave on termination of employment. Example: Zacharie worked for XYZ Pty Ltd. On 25 September 2011, Zacharie ceased employment and was entitled to a single payment of $110,000 consisting of:
The total taxable components are greater than $50,000 so the flood levy is payable. The ETP has a $10,000 tax free component which is exempt from the flood levy. The flood levy is payable on $100,000 - and NOT the $10,000 as this part of the ETP is tax free. How do I report the flood levy on payment summaries?The flood levy is not reported separately on PAYG withholding payment summaries. It is simply included with any other amounts withheld during the year. What other payments does the flood levy apply to?The flood levy is payable on all taxable income. Some lump sum payments will also have the flood levy applied. For example, super payments to a person under the age of 60 years. Some lump sums will not have the flood levy applied. For example, some super benefits paid to a person over the age of 60 years. |
