27 Pays in the 2015/16 Financial Year

Discussion in 'Accounting & Tax' started by Simon Hampel, 21st Jul, 2015.

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  1. Simon Hampel

    Simon Hampel Founder Staff Member

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    I was rather bemused by this document I read - although I know this stuff is serious for some people.

    Personally, I just can't comprehend being in the situation where having more money taken out of your pocket now is better than possibly having to pay more at the end of the financial year.

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    PAYG Withholding for 27 fortnightly pays in a year

    Important Information for Business Partners

    In some financial years, employees will have 27 pay days rather than the usual 26. For some employees this will occur in the 2015/16 financial year.

    The withholding tax tables published by the Australian Tax Office (ATO) are based on the normal (26) pay days in a financial year. Tax rates increase as taxable incomes increase. The additional pay day will mean that amounts withheld from salary and wage payments made to a number of employees may not cover the amount that will be payable when employees lodge their 2015/16 tax returns.

    Note: Employees will pay the same amount of tax irrespective of whether they request additional withholding. In this regard, the only difference is in the timing, i.e. the employee either pays the tax throughout the year or they pay it after the end of the tax year when their tax return is lodged.

    Which employees will be impacted?

    Employees with a fortnightly pay period ending 14 June 2015 (and fortnightly thereafter) will be impacted.

    What can be done?

    Employees who are concerned about the additional shortfall in amounts withheld may ask their employer to withhold additional amounts.

    Note: Employees are encouraged to seek independent financial advice relevant to their individual circumstances before making a decision to withhold additional tax.
     
    Simon Hampel, 21st Jul, 2015
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  2. EN710

    EN710 Well-Known Member

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    I actually can't get my head around this at all.

    So employees with forthnightly pay will get salary for 54 weeks instead of 52?
     
    EN710, 21st Jul, 2015
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  3. Simon Hampel

    Simon Hampel Founder Staff Member

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    Yes, they are paid fortnightly - so when you add up the total amount paid for the financial year - there will be 27 pays (54 weeks) worth to pay tax on.

    However, the ATO calculates withholding tax based on an assumed 26 pays per year to work out which tax bracket applies - so there is an additional amount that will need to be withheld to ensure you pay the correct amount of tax (and don't have to pay more at the EoFY!).

    From the ATO - Withholding for 27 fortnightly or 53 weekly pays in a year | Australian Taxation Office

    Fortnightly Earnings ... Additional withholding per pay:
    • $1,400 - $3,049 ... withhold an extra $12 per pay
    • $3,050 - $6,799 ... withhold an extra $17 per pay
    • $6,800 and over ... withhold an extra $42 per pay
    ... of course if you have income from other sources, all these calculations go out the window anyway.
     
    Simon Hampel, 21st Jul, 2015
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  4. EN710

    EN710 Well-Known Member

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    :eek:

    Prefer them to tax me normal rate and do adjustment at the EOFY. Additional witholding $12-$17 per forthnight is a good coffee money
     
    EN710, 21st Jul, 2015
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  5. Blacky

    Blacky Well-Known Member

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    Explain how this is any different to any other year?
    Depending on each company's payment schedule it is always possible for the salary payment to fall early in the month, and therefor you get paid 27 pays in one calendar year.

    Blacky
     
    Blacky, 22nd Jul, 2015
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  6. Simon Hampel

    Simon Hampel Founder Staff Member

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    Sure, if you consider all companies with different payment schedules, it can happen any year.

    However, for one company who always pays on a Thursday, it will only happen every few years (every 6 or 11 years I think it is actually!).

    So it is quite unusual from an individual's perspective.
     
    Simon Hampel, 22nd Jul, 2015
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  7. 158

    158 Well-Known Member

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    I pay weekly on Mondays. So I guess every few years the staff get paid 53 times per year. Ive never had a complaint.

    (Furthermore, I probably would never get a pay dispute - my staff would probably just bury me somewhere if I missed a cent) :eek: I guess that's what you get when you employ staff who have spent more time in jail than out! :eek:

    pinkboy
     
    158, 22nd Jul, 2015
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  8. 2FAST4U

    2FAST4U Well-Known Member

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    What's your line of work?
     
    2FAST4U, 22nd Jul, 2015
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  9. 158

    158 Well-Known Member

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    Abrasive blasting and painting, industrial tiling, polyurethane spraying and other industrial linings.

    All the fun stuff!

    pinkboy
     
    158, 22nd Jul, 2015
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  10. Scott No Mates

    Scott No Mates Well-Known Member

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    Does that mean you rub people up the wrong way?
     
    Scott No Mates, 22nd Jul, 2015
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  11. AndrewTDP

    AndrewTDP Well-Known Member

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    Hmmm we do fortnightly pay.

    Thanks for the heads up. Will inform staff.
     
    AndrewTDP, 22nd Jul, 2015
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  12. 158

    158 Well-Known Member

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    Sure, plenty of people hate me. Take a ticket and get to the back of the line! :eek:

    pinkboy
     
    158, 23rd Jul, 2015
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  13. Tillie

    Tillie Well-Known Member

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    This year the company I worked for is in this situation and initial process was that we as a managers had to explain the impact to our staff members. Not an big issue for me, but after I had to explain it to my peers about 3 times and they still did not get it, I felt sorry for their staff members, who had to rely on their managers to explain it... Eventually I talked to our tax guys and got them to draft simple communication that we sent out to everybody.
     
    Tillie, 24th Jul, 2015
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  14. Simon Hampel

    Simon Hampel Founder Staff Member

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    Not everyone who does fortnightly pay is affected - it depends on the day of the week you pay your staff and the specific fortnight the pay week falls on as to whether you'll have 27 pay periods this year.
     
    Simon Hampel, 24th Jul, 2015
    #14