Overview of Australia Employee Tax Definitions

You can set up, review, and edit tax definitions for Australian employees in the Payroll > Tax Definitions screen of People. This screen shows the Federal Tax Info and Employee Payroll Tax sections.

The Federal Tax Info Section

In the Federal Tax Info section, add a tax record that determines how much tax is withheld from payments made to the employee. An active record must be present in this section for the application to calculate the employee's pay.

If there is a change to an employee’s tax information after you create a record, the best practice is to end date the current record and create a new record.

By default, the list of tax records has Active selected, but you can click All to show all tax information for an employee. If applicable, the list loads historical tax info records.

You can click a tax record to expand or collapse its details.

Federal tax records are divided into the following sections:

• General: Contains fields for defining the effective from and to dates of the tax record. Also contains fields that correspond to the TFN Declaration form that employees complete in Dayforce when they are hired. When users submit this form, the details carry through to the federal tax info record. For more information, see the following:
  • The "TFN Declaration Form" topic in the Appendix: Forms Library section of the Self Service Guide.
  • The instructions in the TFN declaration form, which you can download from the following link: https://www.ato.gov.au/Forms/TFN-declaration/
• Tax Offset: Contains fields for adjusting the amount withheld from payments made to employees through the Withholding Declaration form. This form isn’t available in Dayforce. For more information, see the instructions in the Withholding Declaration form, which you can download from the following link: https://www.ato.gov.au/Forms/Withholding-declaration/
• Medicare Levy: Contains fields for employees who are claiming the Medicare levy reduction or exemption through the Medicare Levy Variation Declaration form. This form isn’t available in Dayforce. For more information, see the instructions in the Medicare Levy Variation Declaration form, which you can download from the following link: https://www.ato.gov.au/forms/medicare-levy-variation-declaration/
• Withholding Variation: Contains fields for claiming upward or downward variations in the amount of tax that is withheld from the employee. Employees can request an upward variation (more tax withheld) through their employee, and a downward variation by submitting the PAYG Withholding variation application form in Dayforce. For more information, see https://www.ato.gov.au/Business/PAYG-withholding/Payments-you-need-to-withhold-from/Payments-to-employees/Variations/
• Tax Treatment Code: Contains a six-character tax treatment code to indicate the PAYG tax scales and other components that are applied to the employee to determine the withholding amount. For more information, see https://www.ato.gov.au/Business/Single-Touch-Payroll/In-detail/Single-Touch-Payroll-Phase-2-employer-reporting-guidelines/?page=3.

Settings for Federal tax info records

Parameter	Description
General (Section)
Effective From	Field: The date that the tax record can start being used in Dayforce. When you add a record, the current date is defined by default, and you can edit it if needed.
Effective To	Field: The optional date at which the tax record is no longer effective to be used in Dayforce.
Resident Code	Drop-down list containing the following residence types: Non-Resident Resident Working Holiday The option that you select determines which settings of the tax info record are editable. For example, if you select Working Holiday, most of the settings are non-editable.
Claim the Tax Free Threshold	Checkbox for indicating that the employee has claimed the tax-free threshold.
STSL Debt	Checkbox for indicating that the employee has a Study and Training Support loan. When this checkbox is selected, the application withholds the calculated amount as part of the STSL tax component that is shown on the employee pay slip.
TFN Exemption Reason	Drop-down list containing the reason for when an employee indicates that they are exempt from quoting their TFN. Options are: Applied separate application for new or existing TFN Claiming exemption for being under 18 years of age and not earning enough to pay tax Claiming for other exemptions
Pay Basis	Drop-down list for selecting one of the following options for how the employee is paid: Full Time Part Time Labour Hire Super or Annuity income Casual
Tax Offsets (Section)
Amount Claimed for Tax Offset	Field for entering the total dollar amount of offsets to reduce the amount of tax payable on the employee's taxable income. This amount is declared by the employee as part of the Withholding Declaration form.
Senior and Pensioners Tax Offset	Checkbox for indicating that the employee qualifies for the seniors and pensioners tax offset (SAPTO) to reduce the amount of tax payable on the employee's taxable income.
Claiming Zone, Overseas or Carer Offset	Checkbox for indicating that the employee is claiming zone, overseas, or carer offset to reduce the amount of tax payable on the employee's taxable income.
Medicare Levy (Section)
Medicare Levy Exemption Type	Drop-down list for selecting the type of Medicare Levy Reduction the employee opted for. Options are: None Half Full
Medicare Levy Reduction Claimed	Checkbox for indicating that the employee opted for the Medicare Levy Reduction.
Spouse	Checkbox for indicating that the employee has a spouse.
Combined Weekly Total Income less than Table A	Checkbox for indicating that the employee's weekly total income, combined with their spouse, is below the lower threshold. Table A is available in the instructions of the Medicare Levy Variation Declaration form, which you can download from the following link: https://www.ato.gov.au/forms/medicare-levy-variation-declaration/
Number of Dependant Children	Field for entering the employee's number of dependant children.
Apply Medicare For Working Holiday Maker	Checkbox to indicate that Medicare tax apples for an employee with a resident type of working holiday maker. This field is only editable when the Resident Code drop-down list in the General section has Working Holiday selected.
Extended definition (Section)
Additional tax option	(Optional) Select to override the PAYG withholding rate for contractors who are under the Voluntary Agreement (VOL) for PAYG withholding and Seasonal Worker Programme (SWP) employees. Available options: for Contractor related options, refer to Payments under a voluntary agreement | Australian Taxation Office (ato.gov.au) for more details. Contractor - VOL - Commissioner instalment rate Contractor - VOL - Flat rate Seasonal worker program flat rate
Flat/Comissioner instalment rate	Becomes mandatory if Additional Tax Option is provided. Once set to a positive number, all payments to the contractors are withheld at the rate. For the Seasonal worker program flat rate option, payments which are ETP as defined by ATO - Schedule 11 are automatically excluded from the flat rate when Dayforce calculates PAYG.
Contractor - Opt in Super Liability Reporting via STP	Select this checkbox to have contractors who are only processed with the employer's superannuation contribution in Dayforce reported through STP. Note: When you provide the Additional Tax Option, all of the preceding fields and settings are inactivated which signifies that regardless of the preceding settings, PAYG withholding is controlled by the selected tax option.
Tax Treatment Code (Section)
Tax Treatment Code	Six-digit mandatory field to indicate the PAYGW tax scales and other components that are applied by the payer to determine payee withholding amounts in every pay event. Click the Info icon to view a table with all of the tax treatment codes.

Add a Federal Tax Info Record

Before You Begin: See The Federal Tax Info Section.

To add a federal tax info record:

1. Go to People, open the employee profile, and click Payroll > Tax Definitions.
2. In the Federal Tax Info section, click Add.
3. Define the Effective From and Effective To fields as needed.
4. Select an option in the Resident Code drop-down list.
5. Define other settings in the General section if applicable.
6. Define settings in the Tax Offset section if applicable.
7. In the Medicare Levy section, select None, Half, or Full from the Medicare Levy Exemption Type drop-down list.
8. Fill out other settings in the Medicare Levy section if applicable.
9. Fill out other settings in the Withholding Variation section if applicable.
10. (Optional) If the income withholding type applies to STP 2 reporting of Voluntary Agreements (VOL) employees or Seasonal Worker Program (SWP) contractors, fill out the Extended Definition section.
11. Enter the Tax Treatment Code to indicate the PAYG tax scale for determining payee withholding amounts.
12. Click Save.

The Employee Payroll Tax Section

The Employee Payroll Tax section is a read-only section. No action is required.

The application displays a list of the following items:

• ER Super
• PAYG
• STSL
• Medicare Levy
• Federal - SFSS

PAYG and STSL are shown in the Taxes section of the employee pay slip. Withholding for Medicare Levy and Federal - SFSS is combined into the PAYG total, if they are applicable for the employee.

ER Super, which is the default employer superannuation contribution, isn’t shown under the Taxes section of the pay slip. Instead, it is shown in the Memo Deduction section, but only if it is configured for the employee. For example, an employee might use a non-default superannuation scheme for the employer contribution. See Overview of Superannuation.

When you select one of the items from the list (for example, PAYG) in the Employee Payroll Tax section, the application expands a section for adding an exemption record to the tax. This functionality isn’t applicable for Australian employees and shouldn’t be used.

For more information on Australian taxes, see Australian Payroll Taxation.