This article discusses two scenarios of change in visa status/tax free threshold field on the tax file declaration form and adjustments that can be made for employees.
Scenario 1: When information on tax file declaration form was incorrect for previous financial year
Firstly employee's tax file declaration form needs to updated. Employee can make this change in the tax declaration screen of their file on HR platform. This will ensure all future withheld tax from the employee is correct.
Since the tax has been deducted incorrectly and PAYG already sent to the employee for last financial year this erroneous tax deduction can be rectified as below:
1. Employer can choose to send a rectified paper-based PAYG summary to the employee with correct residency type. Other information including taxable earning and withheld tax are unchanged since the payments were already made to employee. However this action is not required, since pay run and payment summary were finalised based on the information employee provided through tax file declaration form to the employer.
2. Employee can claim for a tax refund when they select the correct residency type in their tax return. ATO will then refund/or employee would need to pay more tax depending on the employee's residency for tax purpose.
Scenario 2: When information on tax file declaration form was incorrect for current financial year
As mentioned in Scenario 1 TFN form of employee needs to be corrected on the HR platform as a first step.
Next if employer choose to adjust PAYG amount for previous payrun, employer can follow below steps
1. Create an adhoc payrun or a scheduled payrun.
2. Add the employee for whom changes need to be made.
3. Click on the Actions tab for the employee and select Adjust PAYG as per below screenshot.
4. Enter the amount to be adjusted and finalize the payrun.
5. If it's an adhoc payrun, there will be no need to lodge STP for the adhoc payrun. When next scheduled pay run is lodged, this adjustment will be picked up.
If it's a scheduled payrun, lodge STP as normally.