As a business owner in Australia, you’ve got a lot on your plate. From managing staff to keeping the books in order, it’s easy to feel overwhelmed. One important thing about running a business is understanding the weekly tax table and how it applies to you. 

The weekly tax table is influenced by income tax rates, which determine the amount of tax withheld from employees’ wages. In this article, we’ll break it down so you can stay on top of your taxes and keep your business humming.

What is the Weekly Tax Table?

The Australian Taxation Office (ATO) provides the weekly tax table and shows how much tax to withhold from your employees’ weekly pay. The ATO produces tax tables for different payment frequencies: weekly, fortnightly and monthly. 

The ATO also provides other tax tables for different types of payments and employee circumstances. Using the right table means you can ensure you’re withholding the right amount of tax from your employee’s wages.

How to Use the Weekly Tax Tables

1. Calculate your employee’s gross weekly earnings. This includes their base wage plus any allowances, bonuses or overtime pay.
2. Check if your employee claims the tax-free threshold. This is the amount of income an individual can earn before paying tax. For the 2024-25 financial year, the tax-free threshold is $18,200.
3. Find your employee’s earnings and threshold status in the weekly tax table to determine the withholding amount.

Your employee earns $1,500 weekly and claims the tax-free threshold. According to the ATO’s weekly tax table for 2024-25, you would withhold $192 from their weekly pay.

The weekly tax table applies to various payments, including parental leave and compensation. The ATO provides separate tax tables for foreign residents and working holidaymakers.

Pay As You Go (PAYG) Withholding Tax Tables

PAYG withholding is a system where employers withhold tax from employee payments and send it to the ATO on their behalf. The weekly tax table is part of this process, helping you work out how much to withhold.

Employers use PAYG withholding tax tables to determine the correct amount to withhold from employee payments for income tax purposes.

As an employer, you must withhold amounts from payments to employees, some contractors, and businesses without an Australian Business Number (ABN). The withheld amounts are then reported and paid to the ATO through your business activity statements (BAS).

Employer Obligations for PAYG Withholding

To meet your PAYG withholding obligations, you need to:

• Register for PAYG withholding with the ATO. This is a one-off process that you can do online.
• Calculate withholding amounts using the correct tax table. Make sure you’re using the current year’s tax table. Employees may need to submit a withholding declaration to notify employers about their tax offset entitlements.
• Report and pay withheld amounts to the ATO. This is done through your regular BAS, which can be lodged monthly or quarterly.
• Provide payment summaries to your employees at the end of the financial year. These show the total amount of tax withheld from their pay for the year.

Doing this will prevent penalties and stay compliant with ATO requirements.

Accounting Software

Managing PAYG withholding and tax tables can be a hassle if you’re doing it manually. That’s where accounting software comes in. Programs like Xero, MYOB and QuickBooks can automate tax table calculations and streamline your PAYG withholding process. Additionally, these programs can handle additional withholding for study and training support loans, ensuring compliance with the latest ATO tax tables.

When choosing accounting software for your business, ensure it complies with Single Touch Payroll (STP) reporting. STP is a government initiative that requires employers to report payroll information, including tax and super amounts, to the ATO each time they pay their employees.By using STP-compliant software, you’ll save time and reduce the risk of errors in your payroll and tax reporting.

Key Takeaways

• The weekly tax table shows how much tax to withhold from your employees’ weekly pay.
• Employers must use tax tables to calculate PAYG withholding amounts.
• Withholding amounts are reported and paid to the ATO through your regular business activity statements.
• Accounting software can automate calculations and help with PAYG and STP compliance.
• Tax offsets can reduce the withholding amounts and should be considered when calculating PAYG withholding.

FAQs

1. What happens if I don’t withhold the right amount of tax from my employees’ pay?

If you don’t withhold the right amount of tax from your employee’s pay, you may get penalties from the ATO. These penalties can be interest on the unpaid amount and administrative penalties for not meeting your obligations. Sometimes, you may also get criminal penalties if the ATO thinks you’ve deliberately avoided your withholding responsibilities.

To avoid this, you must use the correct tax table and correctly calculate the withholding amounts. If you find out you’ve made a mistake, contact the ATO as soon as possible to discuss your options for fixing the error and minimising any penalties.

2. What do I do if my employee’s circumstances change and affect their tax withholding?

If your employee’s circumstances change, such as they start or stop claiming the tax-free threshold, you need to adjust the amount of tax you withhold from their pay. Your employee must complete a new Tax File Number (TFN Declaration) form to update their details.

Once you get the updated TFN Declaration, use the new information to calculate the correct amount of tax to withhold using the right tax table. Keep records of all TFN Declarations and any changes to your employees’ circumstances.

3. Can I use the same weekly tax table for all my employees?

Not necessarily. The weekly tax table you use depends on your employee’s circumstances, such as their residency status and whether they claim the tax-free threshold. The ATO has different tax tables for different situations, including:

• Residents claiming the tax-free threshold
• Residents not claiming the tax-free threshold
• Foreign residents
• Holidaymakers

Use the right table for each employee based on their circumstances to get the tax withholding right.

4. How often do I pay the withheld amounts to the ATO?

The frequency of your PAYG withholding payments to the ATO depends on the size of your business and the amount of tax you withhold. For example, small withholders of $25,000 or less must make the payments quarterly, while medium withholding businesses of $25,000 to $1 million pay monthly. 

From 1 July 2024, the $450 per month threshold for super guarantee eligibility has been removed. Employers must pay a super guarantee for all eligible employees regardless of how much they earn.Check your BAS or talk to your tax agent to determine your payment frequency. Make sure you pay on time to avoid interest and penalties.