DO you get paid today? If you do, and you receive your wage weekly or fortnightly, you may be caught short come tax time.
Most financial years have 26 fortnightly pay days, or 52 weekly ones.
But if you received a pay on Friday July 1, as many in both the private and public sector would, that will mean that by June 30 they will have received 27 payments – a problem if not enough tax was deducted.
“Because Pay As You Go tax withholdings are calculated across a 26-pay year, the extra pay can lead to a shortfall in tax deducted from your pay each fortnight,” an ATO spokesman said.
“It will depend on an individual employer’s pay cycle, but for those who pay fortnightly, approximately every 12 years there are 27 fortnightly pays instead of 26.”
Usually an employer will alert workers to this scenario, and give them the option of witholding more tax from their pay each week or fortnight to avoid a shortfall.
“If that did not happen for the current financial year then there is nothing that can be done at this late stage,” the spokesperson said.
“Depending upon their other circumstances the employee may receive a smaller tax refund than is usual or may incur a tax debt on lodgement of their tax return.”
So while an extra pay is handy, if enough tax is not being taken out in some cases a tax rebate could be turned into a tax bill.
Patrick Fassetta, director of payroll company Paypac Payroll Services, said the onus was on employers to alert workers.
“The ATO, in its tax schedule, has information relating to whether your pay period would be 27 fortnights, or 53 weeks, and the amount of extra that should be deducted every week to compensate for that extra pay,” Mr Fassetta said.
“There is no automation within the ATO of a different tax scale – they simply advise companies to deduct an extra amount depending on income.
“Generally companies would broadcast out to say ‘we’re going to have an extra pay period – this is the amount of extra, depending on your income, that we would want to deduct from your pay, do you agree?'”
“Some people might opt not to pay, and they’ll just pay it at the end of the financial year.”