Dear Forum,
Can someone please tell me if there is a formula to calculate the weekly tax payable of an employee and of so, what this formula is? For example, how do I calculate the tax payable for an employee who earns $1,250 (gross) in one week and $730 (gross) in another week? Your help in this matter is much appreciated.
Thank you,
damo12
Hi @damo12
They're worked out as coefficients based on a few things. For example: residency, Medicare levy, and whether they've claimed the tax-free threshold. You can find the details for any given scenario on our page for Statement of formulas for calculating amounts to be withheld.
If you don't need the coefficient formulas and just want to know how much to withhold on a given pay cycle, you can use our tax tables to help work it out instead. There's a lot less math involved in those, since you just need to find the amount in the right tables!
Hi @damo12
They're worked out as coefficients based on a few things. For example: residency, Medicare levy, and whether they've claimed the tax-free threshold. You can find the details for any given scenario on our page for Statement of formulas for calculating amounts to be withheld.
If you don't need the coefficient formulas and just want to know how much to withhold on a given pay cycle, you can use our tax tables to help work it out instead. There's a lot less math involved in those, since you just need to find the amount in the right tables!
Thanks BlakeATO. Your help is much appreciated. Actually, it is the maths I'm interested in. Would you be able to provide me a worked example of how the amount withheld is calculated? For example, if an employee earns $1,250 per week, is a resident for the full year and is claiming the tax-free threshold and Medicare levy, what is the formula(s) I would use to work this out? Your help in this matter is much appreciated.
Thank you,
damo12
Hi @damo12
The statement of formulas page says the base formula is y = ax - b:
Scale 2 is the tax-free threshold claimed table. And the Notes say tables 1, 2, 4, and 6 all already include Medicare levy. So that's the one you'd use.
If they're earning $1,250 per week, they fall under the weekly earnings (x) less than $ column of $1,282. That makes a = 0.3477, and b = 186.2119
So the figures for that instance are: y = 0.3477 x $1,250.99 - 186.2119. Remember to round to the nearest dollar, or apply the extra if there's an extra pay in that financial year.
If the employee is paid on a less frequent basis, you split it as though it was paid weekly evenly. So in the event of $1,250 one week, $730 the other, paid as one $1,980 payment a fortnight, you'd work it out as $990 per week.
The formula and how to use them are all on the statements of formulas page I linked earlier :)
Hi BlakeATO,
Thank you for your prompt and detailed reply. Your time and effort is much appreciated.
Thank you,
damo12.
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