PAYG withholding is your employer taking tax out of each pay and sending it to the ATO on your account. For a working holiday maker with a TFN on file it should be 15%. Two things decide whether it is: your declaration form, and whether your employer is registered.
What does the withholding rate depend on?
The declaration form, first. Payroll applies a rate based on what the Tax File Number Declaration says about you, so telling a manager your number verbally or showing a photo of the letter changes nothing until the form is completed. Until then the law requires 45%.
Second is the employer's own registration. A business must register with the ATO as an employer of working holiday makers before it can apply the 15% rate. An unregistered employer must withhold at foreign resident rates instead, currently 30% on the relevant bracket, however perfect your own paperwork.
- TFN declaration completed, employer registered: 15%
- TFN not yet on file with that employer: 45%
- Employer not registered as a WHM employer: foreign resident rates, currently 30%
- Tax free threshold ticked in error: too little withheld, and a bill later
How do you read the rate off your own payslip?
Divide the tax withheld by the gross pay for the same period. That is the whole check, and it catches a wrong rate before months of it accumulate.
A payslip should show gross pay, tax withheld, super and net pay as separate lines. Super at 12% is paid by the employer on top of your wages rather than deducted from them, so it should never reduce the net figure. If the withheld figure divides out at 45% and your declaration form went in weeks ago, that is a payroll problem to raise immediately rather than a tax problem to sort out in October.
Is over-withheld tax lost?
No. Every dollar withheld is a prepayment credited against what you actually owe, so if 45% was taken and 15% was due, the difference comes back when the tax return is lodged.
What is genuinely lost is the use of the money in the meantime. Thirty cents in every dollar sitting with the ATO from February until August is the real cost, and for someone paying hostel rent weekly that gap decides what the year looks like. Fix a wrong rate now rather than treat it as a larger refund later.
What happens to the figures at the end of the year?
Your employer finalises payroll reporting after 30 June, and the year's total wages and total tax withheld are reported to the ATO under your TFN. Those figures become your income statement, and a return is built from them rather than from your payslips.
Income therefore sits in ATO systems even when your own records do not. A job you left abruptly, an employer that has since closed, or a payslip you never received does not remove that income from your return. It does mean the total has to be retrieved rather than remembered.
Which PAYG problems are worth chasing?
The ones that changed the rate for a sustained period, rather than a single odd payslip. A month at 45% before a declaration form was processed, a whole harvest season with an unregistered labour hire company, or a second job that ran at the wrong rate all year are each worth real money, and each is recovered through the return.
Two others run the other way. Claiming the tax free threshold on a declaration form as a working holiday maker means too little was withheld, which produces a bill rather than a refund. Cash in hand work has nothing withheld at all, so the tax on it falls due in full at year end. Checking what the tax withheld line on your payslip means each pay period is what stops any of these from running for months.