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Do you pay wages to employees, or are you an employee? Recent changes to tax tables may affect you!
Tax tables have changed from 1 October
Changes to individual tax rates for the 2016 – 2017 year were announced in the Government’s May budget. As a result, the Australian Taxation Office (ATO) has updated a number of tax tables taking effect from 1 October.
How does this affect you? The key change is the 37% tax rate which now applies to individuals earning $87,000 per year. This rate previously applied once an individual earned $80,000 – so a slight tax break for anyone earning over $80,000. There have also been changes to the Medicare levy reduction threshold which has increased for some employees.
What does this mean for you?
If you are a business owner with employees, you will need to refer to the new tax tables when calculating how much tax to withhold each pay day.
Most software providers will automatically update their tables, but we suggest checking with your particular provider to be sure.
If you process your wages manually, you can access the new tables through the ATO website here. The ATO also provides a handy tax withheld calculator that calculates the correct amount of tax to withhold.
If you are an employee earning more than $80,000, the great news is that you should now be receiving a little more in your take home pay. If not, check with your employer that they are using the most up to date withholding tables.
While these changes were effective from 1 July 2016, the Federal Election meant legislation wasn’t passed until much later.
The new tables don’t take into account the reduced amount of withholding required from 1 July 2016 to 30 September 2016, so you have probably had more tax withheld during this time than was necessary. Don’t worry, if you have been affected you will receive the full benefit of the changes upon lodgement and assessment of your 2017 income tax return!
Other changes to tax tables from 1 October
Various other tables (e.g. Medicare Levy, termination payments) have had minor updates as a result of the changes.
If you are uncertain if your business is affected you can view a full list of the changes here.
It’s important for business owners with employees to ensure that accounting software is updated with these new tax tables.
If you have any questions about these changes and how they affect you, please speak with your usual McKinley Plowman advisor or contact us here.
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