Tax Scale Focus:

Calculating withholding fortnightly, monthly or quarterly amounts

1st step 2nd steps
 The Main Formula

2nd steps
Slnum. Calculation
Employee’s weekly earnings are $1,103.45. Employee has completed a Tax file
number declaration claiming the tax-free threshold. The employee has also provided a
Medicare levy variation declaration with five children shown at question 12.

Therefore, scale 2 is applied.

x = 1,103.99

Weekly withholding amount (y)

= (a × x) – b
= (0.3477 × 1,103.99) − 186.2119
= 197.6454 or $198.00 (rounded to the
nearest dollar)

Levy adjustment: weekly earnings are greater than

WFT ($1,168.25) and less than the SOP ($1,460)
TC 1 appropriate to an employee with five children.
Formula (2) applies.
= 1,103.45 x 0.0200
= 22.069 or $22.00 (rounded to the
nearest dollar)

Net weekly withholding amount

$198.00 − $22.00 = $176.00

Employee’s fortnightly earnings are $1,110.30. Employee resides in zone B, has

provided a Tax file number declaration that claims the tax-free threshold. The
employee has also lodged a Medicare levy variation declaration claiming a full
exemption from the Medicare levy.
Therefore, scale 5 is applied.

Convert to weekly equivalent

TC 2 = (1,110.30 ÷ 2)
= 555.15 or $555 (ignore cents)
x = $555.99

Weekly withholding amount (y)

= (a × x) – b
= (0.1900 × 555.99) − 68.3462
= 37.2919 or $37.00 (rounded to the nearest dollar)

Fortnightly withholding amount

$37.00 × 2 = $74.00

Net fortnightly withholding amount

$74.00
 A foreign resident employee is working in Australia under a work and holiday makers
visa (subclass 462) and has earnings for the month of $2,825.75.

The employee has provided their TFN on a Tax file number declaration, and total
payments you have made to this employee for the income year do not exceed
TC 3 $45,000.
x = 2,825 (ignoring cents)

Withholding amount (y)

= (a × x)

= 0.15 × 2825

= 423.75 or $424.00 (rounded to nearest dollar)

A foreign resident employee is working in Australia under a working holiday makers

visa (subclass 417) and has earnings for the month of May 2021 of $3,570.20.

The employee has provided their TFN on a Tax file number declaration and the total
payments you have made to this employee from January 2021 to April 2021, in the
2020–21 income year, is $47,000. Last month's payment resulted in total payments
TC 4 exceeding $45,000. Therefore, from the next pay you must withhold at the foreign
resident tax rates specified in Table A.

Withholding is calculated at 32.5 cents for every dollar of earnings over $45,000 (to
$120,000)

Current pay = $3,570.20

The value of 'a' in the formula is 0.325.

Withholding = 0.325 × 3,570

= 1,160.25 or $1,160.00 (rounded to the nearest dollar)

 Foreign employee’s fortnightly weekly earnings are $3,400 and scale
3 is applied.

x = 3400 / 2
x = $1,700
TC 5 Weekly withholding amount (y)
= (a × x) – b
= (0.325 x 1700) - 0.3250
= 552.18 or 552.00 (rounded to the
nearest dollar)

Fortnightly withholding amount

$552.00 × 2 = $1,104.00

Net fortnightly withholding amount

$1,104.00
Jeff's taxable income is $45,000 for the 2020–21 income year. He is eligible for both
the low income tax offset and the low and middle income tax offset.

As Jeff's income exceeds $37,000 but is not more than $45,000, he is eligible for a low
income tax offset amount of $700 minus 5 cents for every dollar his income is above
$37,500. That is:

$45,000 − $37,500 = $7,500

$7,500 × $0.05 = $375
$700 − $375 = $325

As Jeff's income is between $37,000 and $48,000, he is eligible to a low and middle
income tax offset amount of $255 plus 7.5 cents for every dollar his income is above
$37,000. That is:

$45,000 − $37,000 = $8,000

$0.075 × $8,000 = $600
TC 6 $255 + $600 = $855

Both of the offset amounts reduce Jeff's tax payable.

$325 + $855 = $1,180

Jeff's tax payable can be reduced by up to $1,180 using both the low-income tax offset
and low and middle-income tax offset.
 Additional Calculation
Calculate WFT:
60749 / 52 = $1,168.25

Calculate SOP:
(1168.25 x 0.1) / 0.0800 = $1,460
Tax Withold:
x = (a × x) – b
x = (0.2190 x 865.34) - 74.8369