How much tax to withhold from your employee pay?

From time to time we get enquiries from someone who will be employing just one employee or some part-time help on a temporary basis. If this is the case then it may not be economical to purchase or upgrade your existing accounting software to obtain the Payroll system. Instead some employers may opt to record their employee Payroll information using an Excel spreadsheet.

If this is the case the next question is always ‘How do I know how much tax to withhold from my employees pay?’ Answer: The Australian Taxation Office website has a series of Withholding Tax Tables and Look-up Tools that tell you exactly how much tax to withhold based on your employees Gross Pay. The tables are available for either Weekly, Fortnightly or Monthly pay so make sure you select the correct one.

The tables will also have different rates of tax depending on whether your employee is claiming the tax free threshold. Be sure to check your Employee’s Tax File Number Declaration form (that all employees should complete when starting employment with a new employer) to find the nomination made. The Tax File Number Declaration will also alert you to any change in withholding tax for those with a HECS/HELP Loan, Financial supplement Loan or are eligibility to claim additional offsets.