The ATO is very clear about the need for a tax file number ("TFN") and as an employer you need to ensure that you have the up to date tax file numbers for your employees.
Having said that, there are some occasions where you are unable to provide a tax file number for an employee. The ATO provides specific guidance on how software should handle tax file numbers in these circumstances.
Below is a list of the “special” tax file numbers that are made available by the ATO and are fully supported in the payroll platform:
000000000 - This substitute number is allowed where an employee has:
- not completed a TFN declaration; or
- completed a TFN declaration and chosen not to quote a TFN; or
- indicated that they applied or enquired about a TFN with the ATO and failed to provide a TFN within 28 days.
If you select the option "The employee didn’t quote a TFN" on the employee's Tax File Declaration screen, 000000000 will be the TFN set for the employee.
An employer is required to withhold the top rate of tax (currently 47%, which includes the 2% Medicare levy) from all earnings paid to an employee using this special TFN. Refer below for detailed information on how employee earnings are taxed when using this special TFN.
111111111 – This substitute number is allowed where an employee has not provided a TFN but has indicated on the TFN declaration that they have applied or enquired about a TFN with the ATO.
If you select the option "The employee has applied for a TFN but doesn’t have it yet" on the employee's Tax File Declaration screen, 111111111 will be the TFN set for the employee.
333333333 – This substitute number is allowed where an employee is under the age of eighteen and earns $350 or less weekly, earns $700 or less fortnightly or earns $1517 or less monthly.
If you select the option "The employee is under 18 and earns less than the current limit" on the employee's Tax File Declaration screen, 333333333 will be the TFN set for the employee.
444444444 – This substitute number is allowed where an employee is a recipient of a social security or service pension or benefit (other than Newstart, sickness allowance, special benefits or partner allowance) and so has claimed an exemption from quoting a TFN.
If you select the option "The employee has claimed an exemption from quoting a TFN (such as receiving a social security or service pension)" on the employee's Tax File Declaration screen, 444444444 will be the TFN set for the employee.
987654321 – This substitute number is allowed where an employee has supplied an invalid TFN.
If you select the option "The employee quoted an invalid TFN" on the employee's Tax File Declaration screen, 987654321 will be the TFN set for the employee.
For employment termination payments, in the event the payment is due to the death of an employee, show either the TFN of the trustee for the deceased estate or the TFN of the dependant or non dependant of the deceased employee, whichever is applicable.
Can I change an employee's special TFN after 28 days have lapsed and the employee is yet to provide a TFN?
As stated above, an employee who has applied or enquired about a TFN with the ATO (as declared on their TFN form) has a 28 day period where the employer must tax the employee's earnings at the standard rate. If, after 28 days, the employee has not yet provided their TFN to the employer, the employer is required to withhold the top rate of tax from all earnings paid to an employee up until the valid TFN is provided.
Any employee that falls outside of the 28 day period will be identified and listed on your payroll dashboard under the following notification:
The 28 day period is counted from the date entered in the "Date Signed" field in the employee's Tax File Declaration screen. If there is no value in that field the 28 days will start from the employees' recorded start date.
At this stage, you can choose to change the employees' special TFN from 111111111 to 000000000. To do this, click on the employee's name (from the payroll dashboard) so that you are directed to the employee's Tax File Declaration screen. From there, click on the "The employee didn’t quote a TFN" checkbox and click on 'Save'. This will automatically change the employee's special TFN to 000000000:
You can bulk update employee records by exporting the employee data extract, entering 000000000 in the "TaxFileNumber" column (ensure the cells are formatted as text) and importing back into the platform.
Refer below for detailed information on how an employee's earnings are taxed when the special TFN 000000000 is applied against their record.
How is an employee's earnings taxed when using the special TFN 000000000?
Any employee, whose special TFN is recorded as 000000000, will have their earnings taxed at the standard tax rate applicable to the tax calculation options defined by the employee's tax declaration for the first 28 days. The 28 day period is counted from the date entered in the "Date Signed" field in the employee's Tax File Declaration screen. If there is no value in that field the 28 days will start from the employees' recorded start date.
Thereafter, if the employee's TFN is still recorded as 000000000, the employee's earnings will be taxed at the highest tax rate, being 47%. This tax rate will continue to apply until a valid TFN is recorded against the employee.
If you do not want the highest tax rate applied to the employee after the 28 days, simply change their special TFN from 000000000 to 111111111.
When does the system apply the highest tax rate?
The higher tax rate will be applied in the first pay run with a date paid that is after 28 days.
For eg, an employee has 13/7/20 recorded as the "Date Signed" value. The 28 day countdown commences from 14/7/20 and ends on 10/8/20. The employee is paid weekly, on the following pay schedules and taxed as follows:
- Pay period 27/07/2020 to 2/08/2020 • Paid date 4/08/2020 • Marginal tax rate
- Pay period 3/08/2020 to 9/08/2020 • Paid date 11/08/2020 • Higher tax rate
- Pay period 10/08/2020 to 16/08/2020 • Paid date 18/08/2020 • Higher tax rate
The employee's tax rate increases in the pay run with pay period 3/08/2020 to 9/08/2020 because the pay run pay date (i.e. 11/8/20) is after 28 days (i.e. 10/8/20). Also, be aware that the highest tax rate will apply to all earnings in the pay run. There is no pro-rata calculation.
If you have any questions on using special tax file numbers, please contact us on support@roubler.com.
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