The Australian Trainers’ Association (ATA) is aware that some trainers employing international workers may not fully understand or perhaps are unaware of their obligations to withhold the appropriate tax from international workers payments. It is the employers/trainers obligation to ensure that every employee supplies them with a completed and signed Tax File Number (TFN) Declaration form. It is from this information that the appropriate rate of tax to be withheld from the employees pay can be determined.
TAX FILE NUMBER (TFN) DECLARATIONS
The answers your payees provide on their Tax file number declaration (NAT 3092) determines the amount you need to withhold from their payments. A Tax file number declaration applies to any payments made after you receive the declaration. If you receive an updated declaration from a payee, it will override the previous one.
If a payee does not give you a valid Tax file number declaration within 14 days of starting a payer/payee relationship, you must complete a Tax file number declaration with all available details of the payee and send it to the Australian Taxation Office (ATO).
What if a TFN has not been provided?
You must withhold 46.5% from any payment you make to a resident payee and 45% from a foreign resident payee (ignoring any cents) if one of the following applies:
> They have not quoted their TFN
> They have not claimed an exemption from quoting their TFN
> They have not advised you that they have applied for a TFN or have made an enquiry with the Australian Taxation Office (ATO)
If a payee states at question 1 of the Tax file number declaration they have lodged a Tax file number – application or enquiry for individuals (NAT 1432) with the ATO, they have 28 days to provide you with their TFN.
If the payee has not given you their TFN within 28 days, you MUST withhold 46.5% from any payment you make to a resident payee and 45% from a foreign resident payee (ignoring cents) unless the ATO tell you not to.
What if your payee is a foreign resident?
If your payee has answered NO to the question “Are you an Australian resident for tax purposes?” on their Tax file number declaration, you will need to use the foreign resident tax rates.
There are two ways you can withhold from a foreign resident’s earnings:
> If they have not given you a valid TFN, you need to withhold 45% for each $1 of earnings (ignoring cents).
> If they have given you a valid TFN, you need to withhold the amount calculated in the foreign resident tax rates, rounding any cents to the nearest dollar.
As at printing the following rates applied:
0 to 1,538
32.5 cents for each dollar of earnings
1,539 to 3,462
$500 plus 37 cents for each $1 of earning over $1,538
Should you require further information about Tax File Number Declaration click here or for related Tax Withholding Issues click here otherwise you may prefer to contact the Business number for the Australian Taxation Office on 13 28 66 or via their website: www.ato.gov.au