PAYG Tax Setting Code for under 18yrs old employee
I have a new employee who is 15 years old (Australian citizen). On the TFN form, he ticked the option: "I am claiming an exemption because I am under 18 years and do not earn enough to pay tax" , and also he ticked " YES" to claim the tax-free threshold from this payer. I have entered the TFN exemption code 333 333 333. My question is which tax setting code should I select for this situation? Should it be 2-TFT, 4-No TFNr or 8-No Tax and put tax 0% ? Thank you.
Answers
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Welcome to the community @KAHAdmin ! π€
Tax liability is based on amount earned, not age. Ordinarily, if a tax-resident employee doesn't apply for & provide a TFN, the employer is required to withhold tax at the maximum rate (which at the moment is 45%)
The exemption this lad is claiming relates to not needing to have a TFN as it is not compulsory for under 18s. (NOTE: If he does have one though, it's important to enter it in the Tax Reference No field, so his income reports accurately!)
If you have your payroll settings configured correctly, the system will automatically calculate the PAYG. Currently, anyone claiming the TFT who earns UNDER THE THRESHOLD PER PAY PERIOD - currently $ 363 pw / $ 726 pf - won't have any tax liability calculated. Where the employee earns over this amount in a particular pay period, the system will calculate tax to be deducted accordingly (just based on that specific pay only) This is why some people who have earned under the annual TFT have had some tax deducted β¦ but can then claim it back (as a refund) in their tax return π
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Hi Shaz,
Thank you for your explanation. That helps clarify how the exemption works.
However, I just have one part I still need help with "which tax setting code should I actually select for this employee?" Can you please confirm whether "2-TFT" is the correct option?
Thank you.
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Yes, the tax setting should just be as they've selected on their TFN Declaration (in this case, 2-TFT, as he's selected to claim the TFT) π
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Thank you for your prompt reply. Much appreciatedπ
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