A tax file number declaration form is used in a number of situations to ensure that the correct amount of tax is withheld from certain income payments.
This article only discusses tax file numbers of individuals. Other entities may use a Tax File Number or an ABN, subject to other rules.
The declaration is a form given by a payee to the payer, notifying the Tax File Number, and additionally in the case of employee declarations, nominating tax concessions or offsets to which the payee is entitled (i.e. reductions in the rate of tax).
The tax withheld from payments is generally not a final tax. The tax is required to be sent by the payer to the Tax Office, who then makes the tax credit available to the payee. That would usually be after an income tax return including the relevant income has been lodged, and an assessment of tax has been made.
In general, if a tax file number declaration is not provided when should be, the law requires the payer to withhold tax at the highest marginal rate plus medicare, which is currently 46.5% (This will move to 47% from 1 July 2014 following an increase in the medicare levy).
Thus it is not compulsory for a payee to provide a Tax File Number, but in most instances there is a tax penalty for failing to do so. There are also penalties, potential fines and prosecution for payers, especially employers, who do not observe the requirement to withhold the correct amount of tax as determined by whether a tax declaration lodged with them, and the information it contains.
Types of tax declaration
Reporting withholding from [popup url=”http://www.ato.gov.au/businesses/content.aspx?doc=/content/66403.htm” width=”950″ height=”500″]investment income payments[/popup] (e.g. interest). If you have a bank account earning interest, or which may eran in the future, you should ensure that the financial institution has a record of your tax file number. If the file number is correctly recorded, no tax is required to be withheld from interest payments to a resident taxpayer.
[popup url=”http://www.ato.gov.au/businesses/content.aspx?doc=/content/66403.htm” width=”950″ height=”500″]Reporting exemptions[/popup] from quoting a TFN/ABN
- These withholding provisions do not apply if the amount of income paid in respect of the whole financial year is less than:
- $420 for children under 16
- $120 for adults.
Tax file number [popup url=”http://www.ato.gov.au/individuals/content.aspx?doc=/content/6360.htm” width=”950″ height=”500″]declaration [/popup] A PDF version of the form is available as a [popup url=”http://www.ato.gov.au/download.asp?file=/content/downloads/IND6360n3092_so.pdf” width=”950″ height=”500″]’sample only'[/popup]
Withholding [popup url=”http://www.ato.gov.au/businesses/content.aspx?menuid=0&doc=/content/17332.htm&page=2&H2″ width=”950″ height=”500″]declaration[/popup]
TFN withholding for [popup url=”http://www.ato.gov.au/individuals/content.aspx?menuid=0&doc=/content/00247255.htm&page=23&H23″ width=”950″ height=”500″]closely held trusts[/popup]
This page is being updated and was last edited on 16 May 2013