Employers to implement updated tax tables by November 16
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Employers to implement updated tax tables by November 16

“It’s time for employers to implement updated tax tables by November 16, including payroll processes,” the ATO has said. The updated tax withholding schedules will then reflect the actual 2020–21 income year personal income inclusive of retrospective tax cuts.

Hot on the heels of the government’s stage 2 tax cuts breezing through Parliament on Friday, the Australian Taxation Office (ATO) took under a week to update and publish the tax withholding schedules, signalling that tax cuts could reach some employees in days.

With updated schedules available at ato.gov.au/taxtables, employers have been asked to make adjustments in their payroll processes and systems in order for the tax cuts to be reflected in employees’ take-home pay.

Adjustment to Withholding Tax Schedules

“Employers must make sure they are withholding the correct amount from salary or wages paid to employees for any pay runs processed in their system from no later than 16 November onwards,” the ATO said.

It reiterated that the complexity of implementing these adjustments may be different for each employer.

“As such, some employees may notice the tax cuts reflected in their take-home pay within a few days or weeks, while for others it may be longer. Any withholding on the old scales will be taken into account in the employee’s tax return,” the ATO confirmed.

The ATO earlier confirmed that excess tax that workers paid from 1 July will be included in their tax assessment at the end of the 2020 financial year.

“The adjustments to the withholding schedules are designed to ensure that taxpayers have the correct amount of tax withheld from their pay going forward,” it said.

“It is not possible for the ATO to determine the extent of ‘over-withholding’ that may have occurred for each and every taxpayer as this is highly dependent on individual circumstances and will be different for everyone.”

Payment Of Retro Tax Cuts Months Out

Last week, the Institute of Public Accountants warned that the retrospective component of the tax cuts may not translate into ringing cash register sales as soon as the Treasury expected.

“The ATO is unable to retrospectively deal with the PAYG overpaid for the first quarter of the financial year. Therefore, many salary and wage earners may not get the ‘backpay’ for the months of July, August and September as instantly as first thought,” said IPA chief executive Andrew Conway.

Maja Garaca Djurdjevic is the editor of My Business  has authored this article.
The complexity of implementing these new withholding arrangements so as to reflect retrospective tax cuts may be different for each employer, and will necessitate changes to payroll processes and systems.  

If you have any questions on the implementation of the above, or need help, call MB+M on 03 5821 9177 and speak with one of our experienced Business Advisors. 
Additional Reading:
1. Updated schedules are available at ato.gov.au/taxtables
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