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Friday, 3 January 2014

Tax tables for back payments, commissions, bonuses and similar payments

The Tax Office has updated their standard PAYG Withholding tax tables (schedule 30) for employers paying back payments, bonuses, commissions or similar payments to their employees.

Back payments are payments that were meant to have been paid in a prior period where an employee was entitled to this payment, including lump sum payments in arrears.

Examples of back payments include:
  • Where wages or salary were underpaid in a prior period;
  • An allowance that was due to be paid in a prior period; or
  • A bonus that was due to be paid in a prior period.

When an employer is required to make an additional payment, the employer is required to calculate the amount withheld by either using method A or B.

Method A calculates an average withholding amount by dividing additional payments made in the current year over the number of pay periods in a financial year that is to be applied against gross earnings in the current pay period.

Method B calculates the withholding amount by averaging all additional payments made in the current year over the number of pay periods in a financial year, which is then applied to the average total earnings to date.

Click here for instructions on using method A and B with examples, types of additional payments and other relevant information.

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