Payees - Payee Master File (Tax Treatments and Income Streams Explained)

Sharlyce Reed

Feb 05, 2025

3032

Tax Treatments and Income Streams Explained

Tax Treatments Explained

The Tax Treatment and relationship to the Income Stream Type is automatically determined by how the payee is configured.

Using the Australian Taxation Office provided formulas, tax calculations are automatically performed based on the tax schedules. Factoring in the payee's tax treatment and pay types results in streamlined and accurate tax calculations that save time and eliminate errors. When processing a pay run, amounts are allocated to Income Stream Types such as Salary and Wages, Closely Held employees, Working Holiday Makers, Foreign Employment Income. Country codes may be applicable, and multiple income types can be reported for the same payee throughout the year without adding the same payee multiple times.

Regular
Seniors and Pensioners
No TFN
Working Holiday Maker
Foreign Resident
Seasonal Worker Programme
Horticulturists and Shearers
Voluntary Agreement
ATO-Defined
Actors

Regular

Regular is applicable when the Payee is not otherwise covered by another tax table, including directors, office holders, religious practitioners, labour-hire workers and Pacific Labour Scheme workers. This Tax Treatment is available when the Payee is An Australian resident for tax purposes and has provided a valid Tax File Number or 111-111-111 or 333-333-333.

Regular Payees can be paid as any of the following Income Streams:

Seniors and Pensioners

Seniors and Pensioners is applicable when the Payee is 66 years of age or older or where the Payee is a veteran receiving a service pension and/or war widows/widowers receiving an income support supplement from the Department of Veterans’ Affairs, they must be at least 60 years of age. This Tax Treatment is available when the Payee is An Australian resident for tax purposes and has provided a valid Tax File Number or 444-444-444. Either the Withholding Declaration (NAT 3093) or Withholding declaration – short version for Seniors and Pensioners (NAT 5072) should be obtained to confirm this Tax Treatment is applicable.

Seniors and Pensioners can be paid as any of the following Income Streams:

No TFN

No TFN is applicable when the Payee has not supplied a Tax File Number or has previously supplied 111-111-111 or 333-333-333 where the relevant period has now ended. This does not include Payees hired under the Seasonal Worker Programme. This Tax Treatment is available when the Payee is either An Australian resident for tax purposes or A Foreign resident for tax purposes and is using Exemption Tax File Number 000-000-000 as they have not provided a Tax File Number within the relevant time frame.

A No TFN Payee can be paid as any of the following Income Streams:

Working Holiday Maker

Working Holiday Maker is applicable when the Payee is working in Australia under Visa subclass 417 or 462 or other bridging visa arrangements. This Tax Treatment is available when the Payee is A Working Holiday Maker and has provided a valid Tax File Number or 000-000-000 or 111-111-111.

A Working Holiday Maker Payee can only be paid as an Income Stream Working Holiday Maker.

Foreign Resident

Foreign Resident is applicable when the Payee selected A Foreign resident for tax purposes in either the Tax File Number Declaration (NAT 3092) or Withholding declaration (NAT 3093). This excludes Payees who are covered by specific tax tables such as Horticulturists and Shearers, Working Holiday Makers or Seasonal Worker Programmes. This Tax Treatment is available when the Payee is A Foreign resident for tax purposes and has provided a valid Tax File Number or 111-111-111.

Foreign Resident Payees can be paid as any of the following Income Streams:

Seasonal Worker Programme

Seasonal Worker Programme is applicable when the Payee is a Foreign resident for tax purposes engaged under the SWP administered by the Department of Employment, Skills, Small and Family Business. Some Payees may be exempt from having tax withheld from their payments if they are from PNG or Kiribati and in Australia for 90 days or less within the financial year.

Seasonal Worker Programme Payees do not have to provide a TFN to their payer for these tax arrangements to apply and can only be paid as Income Stream Seasonal Worker Programme.

Horticulturists and Shearers

Horticulturists and Shearers is applicable when the Payee is working for a continuous period not exceeding six months in any horticultural process associated with the production, cultivation or harvest of a horticultural crop or in the shearing industry such as shearers, crutchers, wool classers, cooks, shed hands and pressers. This excludes workers covered by another tax table, such as for Working Holiday Maker and Seasonal Worker Programme, but includes Foreign Residents. This Tax Treatment is available when the Payee is either An Australian resident for tax purposes or A Foreign resident for tax purposes and has provided a valid Tax File Number or 111-111-111.

A Horticulturists and Shearers Payee can be paid as any of the following Income Streams:

Voluntary Agreement (Future Release)

Voluntary Agreement is applicable when the Payee is a contractor under a voluntary agreement to withhold under section 12-55 of Schedule 1, Part 2-5 of the TAA 1953, including those who have informed the payer of their CIR, that they don’t have a CIR and if the payment includes an amount for GST.

A Voluntary Agreement Payee can only be paid Income Stream Voluntary Agreement.

ATO-Defined (Future Release)

ATO-Defined is applicable when the ATO issues a written notice to the payer to vary the PAYGW downwards (for gross income or specific payments only) for the payee; the payee is a death beneficiary (who is not also an employee) or the payee is not covered by any other tax table, such as for a non-employee for superannuation guarantee purposes only.

ATO-Defined Payees can be paid as any of the following Income Streams:

Actors (Future Release)

Actors is applicable when the Payee is An Australian resident for tax purposes who have provided a valid Tax File Number or using a relevant Exemption Tax File Number per the Tax File Number Declaration (NAT 3092) and is considered to be an actor, variety artist and other entertainers who receive payments for their performances. It includes Payees' performing promotional activities.

Actors Payees can be paid as any of the following Income Streams:

Income Stream Explained

Income Types and Country Codes serve not just one but three crucial purposes!

Firstly, they help the Australian Taxation Office (ATO) identify the tax implications and map to a specific section of the Individual Income Tax Return (IITR).

Secondly, they help to identify whether a payer can claim an STP reporting concession, which can help avoid unnecessary contact by the ATO with the payer - for example, claiming a reporting concession for Closely Held Payees.

Lastly, they clarify the payer's reporting obligations regarding the Income Type and Country Code, for instance, if a tax treaty is in place with the foreign country.

Salary and Wages (SAW)

Assessable income paid to payees for work performed in Australia, other than that included as other Income Types.

Available to the following Tax Treatments,

Regular
Actors
Horticulturists and Shearers
Seniors and Pensioners
Foreign Residents
No TFN
ATO-Defined

Closely Held Payees (CHP)

a payee who is directly related to the small employer entity from which they receive payments, such as family members of a family business, directors or shareholders of a company, or beneficiaries of a trust. The concept of closely held payees flows from existing Payment Summary Annual Report (PSAR) concessions.

Available to the following Tax Treatments,

Regular
Actors
Horticulturists and Shearers
Seniors and Pensioners
Foreign Residents
No TFN
ATO-Defined

Inbound Assignees to Australia (IAA)

Some multinational payers exchange or transfer employees between affiliated entities in different tax jurisdictions for business and commercial purposes.

Available to the following Tax Treatments,

Regular
Actors
Foreign Residents
No TFN
ATO-Defined

Working Holiday Makers (WHM)

income only for limited visa subclasses for foreign residents. In Australia on Visa subclass 417 (Working Holiday) and 462 (Work and Holiday) only.

Available to Tax Treatment Working Holiday Maker.

Seasonal Worker Programme (SWP)

Regional programmes for government-approved employers: Seasonal Worker Programme (SWP) – administered by the Department of Employment, Skills, Small and Family Business.
Available to Tax Treatment Seasonal Worker Programme.

Foreign Employment Income (FEI)

Assessable income paid to payees, who are Australian tax residents, which is subject to tax in another country, for work performed in that country, if the qualification period is met. The payer must pay (or be liable to pay) the foreign government for the tax to qualify as foreign employment income. On finalisation, the Income Type must include an amount for foreign tax paid.

Available to the following Tax Treatments,

Regular

Actors
Horticulturists and Shearers
Seniors and Pensioners
No TFN
ATO-Defined

Voluntary Agreement (VOL)

A written agreement between a payer and a contractor payee to bring work payments into the PAYGW system. The payer does not have to withhold amounts for payments they make to contractors. However, the payer and a contract worker (payee) can enter into a voluntary agreement to withhold an amount of tax from each payment they make to the contractor.

Available to Tax Treatment Voluntary Agreement,

Labour Hire (LAB)

Payments by a business that arranges for persons to perform work or services, or performances, directly for clients of the entity.

Available to the following Tax Treatments,

Regular

Actors
Horticulturists and Shearers
Seniors and Pensioners
Foreign Residents
No TFN
ATO-Defined

Other Specified Payments (OSP)

For the purposes of subsection 12-60(2) in Schedule 1 to the Act, payments of the following kinds are prescribed:

Payments for tutorial services that are provided to improve the education of Indigenous people and are financially supported (directly or indirectly) by the Commonwealth;
Payments for translation and interpretation services provided for the Translating and Interpreting Service (also known as TIS) conducted by the Department administered by the Minister administering the Migration Act 1958;
Payments under a contract to an individual engaged as a performing artist to perform in an activity in which the individual endorses or promotes goods or services; or appears or participates in an advertisement; unless the individual is engaged primarily because he or she is a sportsperson.
Payments of green army allowance (within the meaning of the Social Security Act 1991).

Available to the following Tax Treatments,

Regular
Actors
Seniors and Pensioners
Foreign Residents
No TFN
ATO-Defined