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Tax Scales

To support STP 2, we have created a new set of tax scales. These replace  the previous set of Tax Scales (1, 2, 3, 4 etc.).

  • tax scales are now 4 characters
  • they are derived from a new ATO field called the Tax Treatment Category

Why?

As part of STP 2 the ATO released a new field - Tax Treatment Category, which is a 6 character code with each character representing a classification of the Payee (Employee).  This new code must be populated and reported to the ATO.

Four of these characters capture information previously captured in Synergetic by Tax Scale, Tax Free Threshold Claimed and HELP/SSL or TSL debt.  The synthesis of these fields into the new set of 4 character tax scales was an efficient and elegant solution to populating 4 of the 6 Tax Treatment Category codes.

Tax Treatment Category

The ATO defines Tax Treatment Code as – the structured code that represents the components of PAYGW that have been applied by the payer to the payees’ payments subject to withholding.  

The best way to understand it is to look at it's 6 components

  1. Category
  2. Options
  3. STSL
  4. Medicare Levy
  5. Medicare Levy Exemption
  6. Medicare Levy Reduction

and what they are.

This is shown in the table below.

Note: The possible values for Characters 2 - 6 are dependant upon the value of Category (Character 1).  Each Category code has it's own set of allowed values for the other 5 Characters (2 - 6) .  

CategoryOptionsSTSLMedicare LevyMedicare Levy ExemptionMedicare Levy Reduction

Category of Tax Scale (Char #1)

– that represents the tax table or schedule of withholding rates, such as Regular for the standard weekly, fortnightly, monthly or daily schedules. 

Options (Char #2)

– that represents the options per Category that may be included in the categories of tax scales, such as for Regular: Tax Free Threshold, No Tax-Free Threshold, Daily Casuals

Study Training Support Loans (Char #3)

– that represents where the payee has an obligation to repay a higher rate of withholding when income thresholds are reached. This reflects any loans notified by the payee

Medicare Levy Surcharge (Char #4)

– that represents additional rates of Medicare Levy imposed on those who do not have an appropriate level of private patient hospital cover and earn above a certain income. The rates are dependent upon domestic circumstances (single/family) and combined family income thresholds. This reflects payee choices

Medicare Levy Exemption (Char #5)

– that represents full or half exemption from Medicare Levy for those who meet certain medical requirements; are a foreign resident; or are not entitled to Medicare benefits. This reflects payee choices

Medicare Levy Reduction (Char #6)

– that represents a reduction in the rate of Medicare Levy based on family taxable income below a certain threshold and consideration of the number of dependants, if any. Claiming this variation may also absolve the payee from repayment of Study and Training Support Loans that would otherwise be payable, for the period of reduction. This reflects payee choices.

Regular
R – Regular

T – With tax-free threshold

D – Daily casuals

N – With no tax-free threshold

S – Has STSL

X – No STSL

# – Tier (1, 2 or 3 to be supplied)

X – No surcharge

H – Half

F – Full

X – No exemption

0 – Spouse only

# – Dependants (number between 1 and 9, A if 10 or more)

A – 10 or more dependants

X – No reduction
ACTORS
A – Actor

T – With tax-free threshold

D – 3 or less performances per week

N – With no tax-free threshold

P - Promotional
X – No STSLX – No surchargeX – No exemptionX – No reduction

Horticulturists and Shearers

C – Horticulturists and Shearers

T – With tax-free threshold

F – Foreign resident
X – No STSLX – No surchargeX – No exemptionX – No reduction

Seniors and Pensioners

S – Seniors and Pensioners

S – Single

M – Couple

I – Illness separated couple

S – Has STSL

X – No STSL

# – Tier (1, 2 or 3 to be supplied)

X – No surcharge

H – Half

F – Full

X – No exemption

0 – Spouse only

# – Dependants (number between 1 and 9 to be supplied)

A – 10 or more dependants

X – No reduction

Working Holiday Maker

W – Seasonal Worker Programme

P - Seasonal Worker Programme

X – No STSL

X – No surcharge

X – No exemption

X – No reduction

Foreign Resident

F – Foreign Resident

F – Foreign Resident

S – Has STSL

X – No STSL

X – No surcharge

X – No exemption

X – No reduction

No TFN

N – No TFN

F – Foreign resident

A – Australian resident

X – No STSL

X – No surcharge

X – No exemption

X – No reduction

ATO-Defined

D – ATO Defined

B – Death Beneficiary

V – Downward Variation

Z - Non-Employee

X – No STSL

X – No surcharge

X – No exemption

X – No reduction

Voluntary Agreement

V – Voluntary Agreement

C – With Commissioner’s instalment rate (CIR)

O – Without Commissioner’s instalment rate (CIR)

X – No STSL

X – No surcharge

X – No exemption

X – No reduction


Thus there is a large set of allowed 6 character Tax Treatment codes.  An example of these for each Category is:


Category

Option

Study and Training Support Loan

Medicare Levy Surcharge

Medicare Levy Exemption

Medicare Levy Reduction

Treatment Code

R

T

S

X

X

X

RTSXXX

A

N

X

X

X

X

ANXXXX

C

T

X

X

X

X

CTXXXX

S

S

S

X

X

#

SSSXX#

H

R

X

X

X

X

HRXXXX

W

P

X

X

X

X

WPXXXX

F

F

S

X

X

X

FFSXXX

N

F

X

X

X

X

NFXXXX

N

A

X

X

X

X

NAXXXX

D

B

X

X

X

X

DBXXXX

V

C

X

X

X

X

VCXXXX

Note: Many Tax Treatment Categories will contain the same unique Synergetic Tax Scale, eg:

RTSX exists in all the the Tax Treatment Categories:

      • RTSXXX
      • RTS#XX
      • RTSXX0
      • RTSXX#
      • RTSXXA

New Tax Scales

The set of new Synergetic Tax Scale are all of the unique combinations of the Tax Treatment Category Characters 1, 2, 3, and 5 extracted from the full Tax Treatment Category value set:

  • Char 1 - Category of Tax Scale 
  • Char 2 - Options
  • Char 3 - Study Training Support Loans
  • Char 5 - Medicare Levy Exemption

Tax Scales can be seen at Payroll Configuration - Tax Rates tab


Mapping of Tax Scales Old to New

The mapping of old to new Tax Scales is:

STP Tax Scale

HECS Flag

New STP 2 Tax Scale

1

0

RNXX

1

1

RNSX

2

0

RTXX

2

1

RTSX

3

0

FFXX

3

1

FFSX

4

0

NAXX

4A

0

NFXX

5

0

RTXF

5

1

RTSF

6

0

RTXH

6

1

RTSH

S1

0

RNSX

S2

0

RTSX

S3

0

FFSX

S5

0

RTSF

S6

0

RTSH

SA1

0

SSXX

SA2

0

SIXX

SA3

0

SMXX

SQL for Tax Scales old to new
with cte_tax AS
(
    select 
        tr.Code as TaxScale,
        t.TaxHECSFlag
    from finance.luPayrollTaxationRate tr
      cross join (select 0 as TaxHECSFlag UNION select 1) as t
    where ActiveFlag = 0
),
cte_converted as
(
select pe.*, NewTaxScale = ISNULL(
          (
              SELECT
                  tr.Code
              FROM finance.luPayrollTaxationRate tr
              WHERE tr.LegacyTaxScaleIncHELP = pe.TaxScale
                OR 
                (
                    tr.LegacyTaxScale = pe.TaxScale
                    AND tr.LegacyTaxHELPFlag = pe.TaxHECSFlag
                )
        
          ), pe.TaxScale)
    FROM cte_tax pe
)
select * from cte_converted c
where c.NewTaxScale <> c.TaxScale
  and
  (
      c.TaxHECSFlag = 0
      or 
      (
          c.TaxHECSFlag = 1
          and not exists
              (
                  select * from cte_converted c2 where c2.TaxScale = c.TaxScale and c2.TaxHECSFlag = 0 and c2.NewTaxScale = c.NewTaxScale
              )
      )
  )
order by c.TaxScale, c.TaxHECSFlag

Creating the Tax Treatment Category

When reporting to the ATO,  the STP 2  process takes the Tax Scale and adds Characters 4 (Medicare Levy Exemption) and 6 (Medicare Levy Reduction) to create the Tax Treatment Category to report.

This is shown on the Payroll Employee Maintenance > Tax tab


Explanatory Video

Tax Scale Video (Edited) 20220505.mp4

Reduction in Tax for 'Tax Scale 1 or 2 with HELP' and Salary Sacrificed Super post STP 2

Any Payee who salary sacrifices super and was Tax Scale 1 with HELP, or Tax Scale 2 with HELP and is now RNSX or RTSX will have a reduced Tax amount.

This is because:

Tax Scale 1 with HELP, or Tax Scale 2 with HELP calculated Tax based on income less salary sacrificed super, and HELP on the full income (ie not less salary sacrificed super)

the new four character based Tax Scales calculates Tax and HELP based on income less salary sacrificed super.

eg 'Tax Scale 2 with HELP' pre STP 2 calculates Tax based on income less salary sacrificed super and HELP based on full income

income                                =   $3,000
salary sacrificed super         = - $500
tax calculated on $2,500     =   $598
HELP calculated on $3,000  =   $150
Total Tax                               =   $648

eg 'Tax Scale 2 RTSX - STP 2 calculates Tax and HELP based on income less salary sacrificed super

income                                =    $3,000
salary sacrificed super         = - $500
tax calculated on $2,5000    =   $498
HELP calculated on $2,500  =    $88
Total Tax                               =   $586

Note: Tax Scales S1 and S2 are not affected as these incorporate HELP payment. They have always calculated on the reduced gross amount and will return an exact match with RNSX and RTSX respectively.

Explanatory Video

TaxCalcVariationExplained.wmv

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