Tax withheld on your payslip refers to the amount of income tax your employer has deducted from your gross wages before paying you the net amount. It is the PAYG withholding amount collected by your employer on behalf of the ATO. When you look at your payslip, you will typically see your gross earnings, the tax withheld, and your net pay, which is the amount deposited into your account.
How to check the tax withheld is correct
For working holiday visa holders, the correct withholding rate is 15% of your gross earnings for income up to $45,000 per year. To check whether your employer is applying the right rate, divide the tax withheld figure on your payslip by your gross earnings figure. The result should be approximately 0.15 or 15%.
If the result is significantly higher than 15%, your employer may be using the wrong rate. The most common reason for this is that your Tax File Number Declaration form has not been received and processed, causing the employer to apply the default 47% rate. If that is the case, speak to your employer and make sure they have your form on file.
What happens to the tax withheld
Your employer collects the tax withheld amounts from each pay and remits them to the ATO periodically. At the end of the financial year, your employer finalises their payroll reporting and reports the total wages paid to you and the total tax withheld. This appears as your income statement in myGov. When you lodge your tax return, the ATO calculates your actual tax liability and refunds any excess withholding, or collects any shortfall.
Keep your payslips
Keep copies of your payslips throughout the year. They are useful for checking your income statement figures at tax time and for resolving any discrepancies between what you were paid and what the ATO has on record.
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What is an income statement in Australia and how do you access yours?
An income statement shows your total wages and tax withheld for the year. Here is how to find yours and what to do with it.