All you need to know about weekly tax tables

February 20, 2024
5
minutes to read
by
Justin Bohlmann
Contents

A weekly tax table is a document that is available to small businesses in Australia to calculate employee income tax. The tax table displays the income tax that must be withheld from an employee's salary during a pay run. The table is generated by the Australian Taxation Office (ATO) and is based on the income tax rates and thresholds that are in effect for the nominated financial year. This guide will explain how to use the tax table correctly and why it can help keep your business compliant.

The weekly tax table was designed to make it easy for small businesses to pay their staff and associated taxes correctly. The table contains different tax rates and thresholds for each type of income, such as ordinary time earnings, termination payments, and Director fees. The tax rates included in the weekly tax table are progressive, meaning that the tax rate increases as the employee's income increases. The ATO updates the tax table regularly to reflect changes in tax rates and thresholds.

The table has different tax rates and thresholds for employees eligible for the low-and-middle-income tax offset. The tax offset is a benefit the Australian government provides to individuals with low to middle income. It is designed to provide financial assistance to taxpayers by reducing the tax they need to pay. In essence, the tax offset means that employees that earn lower incomes get taxed less, so it's vital that a business factors this in when doing payroll.

The weekly tax table was designed to be used in conjunction with the PAYG withholding system, which is the system that is used to collect income tax from employees. Under this system, employers need to withhold a certain amount of tax from an employee's salary or wages each pay period, and then remit this tax to the ATO.

Using the weekly tax table, employers can easily calculate the amount of tax that must be withheld from an employee's salary or wages. The employee's gross income is used as the base, and the applicable tax rate and threshold determine the tax amount. Employers are then responsible for remitting the withheld taxes to the ATO regularly.

The latest weekly tax table can be found on the ATO website. The ATO updates the tax table regularly to reflect changes in tax rates and thresholds, so it is essential to use the most recent version when calculating employee wages. The ATO provides different tax tables for different payments, such as ordinary time earnings, termination payments, and Director fees. It also includes tax tables for different payment frequencies, such as weekly, fortnightly and monthly.

You can download the relevant tax table in PDF or excel format on the ATO site. It's important to note that the ATO also provides other tax tables and calculators that can be used for different types of payments and situations, such as businesses and individuals.

Benefits of Weekly Tax Tables

There are a few benefits to using the weekly tax table to calculate employee wages. Some include:  

  • Compliance: Using a weekly tax table ensures that employers comply with the income tax laws and regulations set by the Australian Taxation Office (ATO).
  • Accuracy: Using a weekly tax table ensures that the correct amount of tax is withheld from an employee's salary or wages. The table contains different tax rates and thresholds for different types of income to cover all your bases.
  • Equitable: A weekly tax table ensures that the same tax is applied to all employees, regardless of their circumstances. The table considers the different tax rates and thresholds that apply to different types of income, so it is easy to calculate the correct amount of tax for each employee.  
  • Transparent: Using a weekly tax table ensures that the calculation of employees' wages is clear and transparent. It makes it easy for employees to understand how their wages are calculated and how much tax is withheld.  
  • Record Keeping: Employers are required to keep records of the tax they have withheld and remitted to the ATO. A weekly tax table makes it easy to keep accurate records for tax time.  

Another tool businesses can use is the Tax withheld calculator. The calculator is an easy-to-use tool that employers can use to calculate the correct amount of tax that should be withheld from an employee's salary or wages. It's an alternative to using the weekly tax table.

Weekly Tax Tables FAQs

What are weekly tax tables?

Weekly tax tables are a set of tables provided by the Australian Taxation Office (ATO) that help employers calculate the amount of tax to withhold from their employees' weekly pay.

Why do employers need to use weekly tax tables?

Employers must withhold tax from their employee's pay and remit it to the ATO on their behalf. Weekly tax tables help employers calculate the correct amount of tax to withhold based on their employees' income and other relevant factors.

How do employers use weekly tax tables?

Employers can use the weekly tax tables provided by the ATO to calculate the amount of tax to withhold from their employee's pay based on their taxable income, residency status, and other relevant factors. The tables show the tax rates and thresholds for each pay period.

How often are weekly tax tables updated?

The ATO updates the weekly tax tables each year to reflect changes in tax rates and thresholds. Employers should ensure they are using the most up-to-date version of the tables to ensure they are calculating tax correctly.

What happens if an employer uses the wrong weekly tax table?

If an employer uses the wrong weekly tax table, they may under- or over-withhold tax from their employee's pay. This can result in penalties or interest charges from the ATO.

Can employers manually calculate tax withholding instead of using weekly tax tables?

Employers can manually calculate tax withholding if they choose. However, using the weekly tax tables provided by the ATO is generally recommended as it reduces the risk of errors and ensures compliance with tax laws.

The weekly tax table is an important tool for both employees and employers, as it helps to ensure that the correct amount of tax is withheld from an employee's pay. It is crucial for small businesses to understand how to use the weekly tax table and to stay up to date with any changes to the tax rates. While there are alternative methods for calculating tax withholding, such as the ATO's Tax withheld calculator, the weekly tax table is the most used method for calculating tax withholding for weekly paid employees. By understanding the weekly tax table and staying compliant with tax laws, small businesses can ensure their staff are paid correctly and avoid any penalties from the ATO.

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