TFN Declarations - More Details
The following information is sourced from the ATO website. Further information/clarification is available here.
Withholding amounts from wages and other payments
As an employer, you may need to withhold amounts from payments you make to your workers and businesses you deal with, and send the withheld amount to us.
The most common payments you need to withhold amounts from are payments you make to:
* your employees
* your directors
* businesses that do not quote their ABN to you
* contractors who have a voluntary agreement with you.
Employee or contractor
Your withholding obligations are different, depending on whether your worker is an employee or an independent contractor.
Payments to employees
If you need to withhold amounts from payments to employees, including overseas employees and foreign residents, you need to get them to complete a tax file number declaration. In some cases, they may also complete a withholding declaration. Using the information in the declarations and our tax tables, you can work out how much to withhold.
Tax file number (TFN) declarations
Each of your employees should complete a Tax file number declaration. When you receive a declaration you must:
* complete the payer section
* send the original to us within 14 days
* keep a copy for your records.
An employee's Tax file number declaration gives you certain information that allows you to work out the amount you withhold from payments you make to that employee. For example, whether they:
* are claiming the tax-free threshold
* are an Australian resident for tax purposes
* have a HELP debt or a Financial Supplement debt.
You only use the information for payments you make after you receive the declaration.
If an employee gives you a new declaration, it overrides any earlier declaration.
If an employee does not quote their tax file number (TFN), claim an exemption from quoting their TFN on the declaration or provide a declaration at all, you must:
* complete the payee section with all the information you know about them
* send the declaration to us
* withhold at the top marginal rate plus Medicare levy for residents (currently 46.5%) or the top marginal rate for non-residents (currently 45%) from all payments you make to that employee.
When an employee gives you a completed Tax file number declaration, you must pass their TFN on to their super fund or retirement savings account if you make contributions for them. You must do this within 14 days of receiving the declaration.
Payers are able to submit their electronic TFN Declaration Report file via the ATO's Online Services for Business or Business Portal.
Self-printing of TFN declarations on plain paper is available only to payers who lodge their Tax file number (TFN) declaration report to the Australian Taxation Office (ATO) electronically.
Under the Income Tax Assessment Act 1936, payers are required to report to the Tax Office details of TFN declarations lodged by payees during the reporting period (Section 202CD) and all known details of payees who have not lodged TFN declarations (Section 202 CF) within 14 days of the commencement of a payer/payee relationship.
Payers who lodge TFN declaration reports with the Tax Office must ensure that the information is provided each fortnight. Each report must include the records relevant to the reporting period only, for example, the reports must not be 'year to date' or 'payroll dumps'.
RETENTION OF INFORMATION
When payers report electronically to the ATO, TFN declarations can now be made by a payee through:
* a physical signature on a self-printed TFN declaration form, electronically completed by the payee, or
* a physical signature on the ATO paper stationery TFN declaration form (NAT 3092).
Under taxation law, TFN declarations must be retained by payers for a statutory period, currently set as the second 1 July after the date on which the declaration ceases to have effect.
For example, if a payee ceases work with Payer A on 1 August 2017, then Payer A must retain that payee's TFN declaration until 1 July 2019.
TFN declarations may be imaged for electronic retention, however if the Commissioner of Taxation asks for the TFN declaration within the timeframe stipulated above, the payer must be able to produce the original signed paper TFN declaration.
Care should be taken with the storage and destruction/disposal of paper TFN declarations, in order to maintain the security of the payee's tax file number and other personal details.
See Q8 under FAQ