Extra pay day in the 2015-16 financial year?
Recent changes are outlined below:
July 1, 2022
- Loss carry back for eligible companies extended to cover 2023 income year.
- Professional firm profits diverted to the professional's spouse or other associates to be reviewed under new Tax Office guidance.
- Corporate collective investment vehicle legislative regime introduced.
- Temporary full expensing of depreciating assets extended to include 2023 income year.
- Depreciable assets of a company joining a tax consolidation group have tax costs setting rules modified for assets depreciated under temporary full expensing rules.
December 9, 2021
- Reduced Pandemic leave disaster payment of $750 per week made available through to 30 June 2022.
August 5, 2021
- COVID-19 Disaster Payments are non-assessable non-exempt income in 2021 income year and later. Payments phasing out as vaccination rates increase.
July 1, 2021
- New Investment Engagement Service launched for businesses planning significant new investments in Australia.
- Tax Office small business independent review service made permanent for businesses with turnover < $10m, for income tax, GST, exercise, luxury car tax, wine equalisation tax and fuel tax credits. Requested before amended assessment issued.
- Small business income tax offset for individuals increased to provide a reduction of 16% for a tax payable up to $1,000.
- Self-managed superannuation funds can now have six members, increased from four members previously.
July 1, 2021
- Some COVID -19 state and territory business grants received by small and medium enterprises are non-assessable, non-exempt income for 2021 and 2022 income years.
- Certain state, territory and local government financial support for individuals and businesses suffering COVID-19 impacts made exempt where businesses have turnover less than $50 million and only in eligible programs.
March 31, 2021
- JobKeeper payments scheme ended.
October 5, 2020
- Boosting apprenticeship commencements subsidy (up to 50% of apprentice's wages) is assessable income.
June 4, 2020
- Homebuilder grant for new home or substantial renovation construction is not subject to income tax.
April 1, 2020
- COVID-19 cash flow boost payments are not subject to income tax
Where you are paid weekly on a Wednesday or Thursday, you will actually have 53 pay days during the financial year ending 30 June 2016 and similarly, if you are paid fortnightly and your pay day was either Wednesday 1 July 2015 or Thursday 2 July 2015, you will have 27 pay days for this financial year. This might cause an expected tax refund to become an amount payable!
The extra pay day happens for two reasons being that the 2016 year is a leap year (29 days in February) and also when you divide the number of days in an ordinary 365 day year by the 7 day week, there is a spare day left over.
The Tax Office publishes its PAYG withholding tables on the basis of an ordinary year with 52 pay weeks or 26 pay fortnights. Marginal tax rates increase as taxable incomes increase and your employer may not withhold sufficient tax this year and instead of getting a refund, you may have a small amount to pay when you lodge your 2016 tax return.
You can request that your employer withholds an additional amount for the shortfall. A schedule detailing the additional amounts to withhold to cover the shortfall for this type of year is included in the weekly and fortnightly tax tables.
The Tax Office provides this example on their information sheet. Where your fortnightly pay is $3,200, during a normal year with 26 pays, your taxable income would be $83,200. Using the ATO tax tables, there would be $786 withheld per fortnight totalling $20,436 for the whole year. The tax payable at end of year would be $20,395 leading to a $41.00 refund.
However, during a year with 27 pays, the taxable income would be $86,400 and PAYG withholding over the 27 pay periods would be $21,222. Unfortunately, the annual tax amount is higher at $21,643, leading to an additional amount payable after lodging the tax return of $421.
From a financial perspective, you would be better off paying the additional amount at time of lodging your tax return as you will hold onto the cash longer. However, if peace of mind is the most important thing for you, you can ask your employer to vary your PAYG withholding to cover that shortfall.
Andrew and Tony Lovett
8 July 2015
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