Tax Table Update: make sure your payroll software is up to date

As you may be aware, the Australian Government has announced that Personal Income Tax Rate changes that were due to apply from 1 July 2022 have been brought forward to July 1 2020. This means that the changes applied have been backdated to 1 July 2020. This change was made when the Federal Budget Tax Bill was passed through both houses of parliament on the 9th October 2020.

What does this mean for employers?
For employers with staff members this means that there are new tax tables which will need to take effect from the 16th November 2020 at the latest. Those of you with online payroll systems may have noticed that the net pay of your employees has increased and the PAYG-W component has decreased. You do not need to worry about going back and adjusting previous wages to pay the gap, employees will be able to claim their previous PAYG-W at tax time when they complete their tax assessment for 2021.

The New Tax Table highlighting the new thresholds is below:

Taxable IncomeTax on this Income
$0 – $18,200Nil
$18,201 – $45,00019c for each $1 over $18,000
$45,001 – $120,000$5,092 + 32.5c per $1 over $45,000
$120,001 – $180,000$29,467 + 37c per $1 over $120,000
Over $180,000$51,667 + 45c per $1 over $180,000

The ATO’s tax calculators and tax tables have been adjusted to reflect the following changes and can be accessed here

They have also announced that the low and middle income tax offset will continue to be available for the 2020-2021 financial years but this will no longer apply after 30 June 2020.

What Steps do you need to take?

  1. If you have already processed pay runs since the introduction of the new tax tables on October 13 2020, DO NOT go back and change these. You have until the 16th November 2020 to implement the new tax tables
  2. You DO NOT need to adjust tax in future pays to make up for the ‘overpaid’ tax earlier in the year. Employees will be able to claim this back when completing their Year End Tax
  3. Your Cloud Accounting/Payroll Software provider should automatically update their system to include the new tax tables for pay runs after the 13th October and before the 16th November
  4. If you have a Desktop Software, you will be required to put in a tax patch or upgrade the software in order to install the new rates
  5. Review the direct debits you may have set-up for employees to match the new net pays on their wages

If you have any questions about the new tax tables or want assistance with any of the steps outlined, please contact us.

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