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5.3.1.10 Taxation of Payments & PAYG Payment Summary - Individual Non-Business

Departmental obligations

The department is responsible for calculating the amount of taxable payments it makes to a recipient in a financial year. The formula for establishing the taxable component of a payment is:

  • Rate payable - any non-taxable payments = taxable component.

 

Explanation: The amount of tax a recipient must pay depends on their taxable income (see the definition of taxable income in SSAct subsection 23(1)) for the financial year. A recipient's expected or possible taxation liability is SOLELY a matter between the recipient and the ATO. Any inquiries regarding either the ATO's requirements or tax assessments should be referred to the ATO.

 

Note: Tax treatment of payments made in the case of bereavement may differ due to special rules that apply.

 

Act reference: SSAct section 23(1) General definitions

 

Taxable payments

The following table shows which payments are taxable under each payment type.

Payment Group

Taxable Payments

Newstart & Youth Allowance

- newstart allowance

- YA when the recipient is over 16

Other Labour Market & Older Students

- ABSTUDY living allowance when the recipient is over 16

- Austudy

Retirement & Widows

- age pension

- age pension (blind)

- WP if either person is of age pension age (section 23(5A) to section 23(5D))

- widow B pension

- widow allowance

Families & Parenting

- PP (1.1.P.52)

- partner allowance

Disability & Carer

- CP if either the recipient or the care receiver (1.1.C.20) is of age pension age

- DSP if recipient is of age pension age

- sickness allowance

Special Payments

- bereavement allowance

- special benefit

Supplementary Benefits

- bereavement lump sum payment above the tax-free amount

- education entry payment

- pension supplement basic amount

 

Act reference: SSAct section 23(5A) to section 23(5D) Pension age, section 236A Lump sum payable in some circumstances

 

Non-taxable payments

The following table shows which payments are NOT taxable under each payment type.

Payment Group

Non-taxable Payments

Newstart & Youth Allowance

YA payments made when recipient under 16

Other Labour Market & Older Students

ABSTUDY living allowance when recipient under 16

Retirement & Widows

- pension bonus scheme

- pension loan scheme

- WP, for DSP wives, if:

  • - both persons or partners are under age pension age, or
  • - the survivor is under age pension age

Families & Parenting

- double orphan (1.1.D.240) pension

- FTB Part A including RA, multiple birth allowance

- FTB Part B

- maternity immunisation allowance

Disability & Carer

- carer allowance

- CP if both the recipient and the care receiver are under age pension age, or if a lump sum is paid under SSAct section 236A because of the death of the care receiver, CP is tax exempt up to the tax free amount

- DSP if recipient is under age pension age

- DSP (blind) if recipient is under age pension age

- incentive allowance

- mobility allowance

Special Payments

- Australian Government Disaster Recovery Payment

- crisis payment

Supplementary Benefits

- ABSTUDY supplementary benefits

- AIC scheme allowances

- baby bonus

- bereavement lump sum payment up to the tax-free amount

- child care benefit

- clean energy advance

- clean energy supplement

- employment entry payment

- fares allowance

- income support bonus

- language, literacy and numeracy supplement

Note: LLNS is not added back to taxable income for income testing purposes for FTB or CCB.

- large family supplement

- low income supplement

- matched savings scheme (income management) payment

- pensioner education supplement

- pharmaceutical allowance

- quarterly pension supplement

- RAA (offsets the Zone Tax Rebate)

- rent assistance

- seniors supplement

- student financial supplement scheme

- the tax exempt pension supplement amount

- telephone allowance

- utilities allowance

- VIM incentive payment

- youth disability supplement

 

While RAA is non-taxable, on a dollar for dollar basis it reduces the recipient's tax offset. RAA recipients are notified of this on the back of their statement of pension or benefit.

 

Act reference: SSAct section 236A Lump sum payable in some circumstances

 

Non-taxable components

A recipient may be paid a number of different components that are non-taxable and are not related to tax offsets. At the request of ATO, from the 1999-00 financial year non-taxable add-on components are not reported on the PAYG payment summary - individual non-business. Only the non-taxable BASIC component is included in the tax- exempt amount on the PAYG payment summary.

 

Exception: In certain circumstances, other components will appear in the tax-exempt field. This occurs only when a component can either be taxable or non-taxable which is dependent upon the recipient's particular circumstances. This occurs for the following components:

Pensions

Basic Supplement

ABSTUDY and ABSTUDY Schooling A

- additional assistance

- basic to board provider

- basic to boarding school

- school fees allowance - Group 2 to school for board

 

PAYG payment summary - individual non-business

At the end of each financial year, recipients are automatically advised of the amount of taxable pension or benefit they received during the year.

 

Exception: If a recipient requests a duplicate PAYG payment summary, it is issued manually.

 

PAYG payment summary - individual non-business are issued to all recipients who have received either taxable payments and/or tax offset related components irrespective of whether tax has been deducted from payments. No statements of payment are issued. No PAYG payment summary is issued to recipients who receive a payment that is not taxable. PAYG payment summaries can be issued manually to recipients who have only received a non-taxable pension.

 

Payments transferred interstate

Each state issues PAYG payment summaries for all payments in that state. Tax details of recipients who move interstate are sent to the receiving state and included in that state's issue.

 

Act reference: Income Tax Assessment Act 1997, see section 51-10 Education and training, Subdivision 52-A Exempt payments under the Social Security Act 1991, Subdivision 52-E Exempt payments under the ABSTUDY scheme

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Last reviewed: 20 March 2013


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