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Taxation

General

The information provided here is general information only to assist principals, managers and employees in matters relating to the payment of income tax. The information provided here in relation to employee/employer taxation obligations applies to those employed on the Department’s central payroll system. For information on employer/employee taxation obligations for those employed on the CASES21 local payroll, refer to the School Level Payroll Guidelines

For comprehensive taxation information, particularly concerning an individual’s tax situation, refer to the Australian Taxation Office (ATO) web site at http://www.ato.gov.au

Tax is deducted from all payments made on the payroll in accordance with ATO guidelines and the information provided by the employee on their Tax File Number Declaration and/or Withholding Declaration.

The ATO provides tax instalment schedules and an online Tax Instalment Calculator that can be used to determine the tax to be deducted from fortnightly salary payments. The schedules and the calculator are available on the ATO web site (refer to 'Other Resources' below).

Tax File Number Declaration

An employee is required to provide a Tax File Number Declaration form in the following circumstances:

Commencement of employment,
After any break in employment
Where taxation details change

Information provided on the Tax File Number Declaration and the Withholding Declaration is used to determine the tax to be deducted from salary payments.

For employees on central payroll system, the employer details must be completed as follows:

The ABN is 52 705 101 522 and
the registered business name is 'State of Victoria-Department of Education and Early Childhood Development'.

The Tax File Number Declaration form is available from the ATO or from selected Newsagents.

Where a Tax File Number (TFN) is not provided on a TFN declaration form, tax is required to be deducted at the highest marginal tax rate.

Employees that indicate on the TFN Declaration form that a TFN application/enquiry has been lodged with the ATO are given the benefit of having supplied a valid TFN for a period of twenty-eight (28) days. If a valid TFN has not been supplied by the end of the 28 day period, the top marginal tax rate will apply to subsequent salary payments until a valid TFN is supplied. It is essential to note that, only where the TFN application/enquiry box on a declaration is ticked, is an employee to be given the 28 day period of grace in which to supply a valid TFN.

The exceptions to the requirement for supplying a TFN are persons who indicate on their declaration that they are a pensioner, less than sixteen years of age, or have lodged a TFN application/enquiry form.

The declaration form is not to be forwarded to the ATO for employees paid on central payroll as this information is electronically conveyed to the ATO on a regular basis. The processed form should be retained in a secure location but NOT on the employee's personnel file.

Tax File Numbers are confidential. Taxation and privacy legislation provide for severe penalties for the misuse of a TFN. Specifically, employers are required to ensure that:

access to TFN information is restricted to persons undertaking duties related to the administration of taxation laws;
TFN information is protected by reasonable security safeguards to prevent loss, unauthorised access, or disclosure;
staff are instructed about the prohibitions on the collection, use and disclosure of TFN information.

Tax-free threshold

An employee can only claim the tax-free threshold with one employer. This is usually the employer who pays them the most salary.

Withholding Declarations

A Withholding Declaration can only be provided after a Tax File Number Declaration has been lodged with the employer.

A Withholding Declaration may be required in the following circumstances:

To adjust the amount withheld from salary
To advise of a change to information previously provided in a Tax File Number Declaration.

Declarations for school based staff are processed in the school. Staff in non-school locations should forward their declarations to Corporate HR Services for processing.

Higher Education Loan Schemes (HELP and SFSS)

An employee with a Higher Education Loan Programme (HELP) or Student Financial Supplement Scheme (SFSS) debt must indicate on the TFN Declaration that they have this debt. The payroll system will automatically calculate tax deductions each fortnight in order to repay this debt. An employee who wishes to make additional payments to meet their HELP or SFSS debt should make extra payments directly to the ATO.

Rebates

A rebate can only be claimed on a Tax File Number Declaration form where the employee is claiming the tax-free threshold. A rebate reduces the amount of tax an employee is required to pay. A withholding declaration is also required when claiming these rebates. For more information regarding available rebates and eligibility contact the ATO.

Variation to the PAYG withholding amount deducted

Full details on variations can be found on the ATO website. For employees on the central payroll, any notice received should be forwarded immediately to Payroll Services. When a centrally paid employee applies to the ATO for a variation the employer details must be shown as the Department of Education and Early Childhood Development.

An employee may request that additional tax be deducted from their salary. This request must be in writing and will remain in force until the employee withdraws the request in writing. An employee cannot request a reduced taxation rate other than by claiming an appropriate rebate.

Tax on arrears payments

The tax instalment deducted from a lump sum payment of salary or allowance arrears is calculated by applying the amount of tax that would have applied had the payments been received normally (that is, each fortnight over the period to which the arrears apply). Arrears for periods greater than twelve months may be taxed at a special rate if certain conditions apply. In such cases, advice should be sought from Schools' HR Services for school-based staff or Corporate HR Services for VPS/Executive staff.

All payments of salary, including allowances, are included in the PAYG payment summary for the financial year in which the income is received. This applies to payments of salary or allowance arrears, even if they include arrears for a period in a previous financial year.

Tax on salary loading allowance

Payment for salary loading allowance is subject to tax if the allowance exceeds the current threshold of $320. Only that part of the payment that exceeds this threshold is subject to tax.

Tax on payments of unused long service leave

Tax is levied on payments for unused long service leave for an employee who has ceased employment at the following rates:

Five per cent of the payment for long service leave accrued before 16 August 1978 is taxed at the employee's marginal tax rate at the time of cessation of employment (coded as LSB).
All of the payment for long service leave accrued between 16 August 1978 and 17 August 1993 is taxed at 31.5 per cent (coded as LSA).
Payment for long service leave accrued after 17 August 1993 is taxed at the employee's marginal tax rate at the time of cessation of employment (coded as LSX)

Tax on WorkSafe and accident compensation payments

Lump sum payments of WorkSafe and accident compensation payments that are calculated at a weekly or other periodical rate should be taxed in accordance with the rates set by the ATO.