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PAYG withholding for Community Development Employment Program | |||||||
Introduction
New arrangements have been made to make it easier for employers participating in Community Development Employment Projects (CDEP) to comply with pay as you go (PAYG) withholding requirements. These arrangements have been put in place to make sure the income tax obligations of all workers are met each year.
This guide describes:
- the difference between CDEP and non-CDEP payments
- what PAYG withholding is and your obligations as an employer
- how to work out the amount to withhold from a worker’s payments
- when your workers need to give you their tax file number (TFN), and
- where to go for more information.
CDEP payments
A CDEP payment is one of the following:
- CDEP scheme wages.
These are payments that are:
- paid to participants as a wage for the work they do
- CDEP payments for hours worked in excess of the CDEP ‘limit’, or
- payments made to trainees under the traineeship program.
- CDEP scheme participant supplement from a Centrelink payment.
The supplement is an extra payment to make sure that someone getting a CDEP wage component is getting the same level of income as an unemployed person.
These payments are commonly referred to as ‘CDEP payments’.
What is not a CDEP payment?
CDEP payments do not include:
- CDEP administration amounts.
These funds are used to administer the CDEP program. Depending on the size of the organisation, this component is used for administration costs such as supervisor’s wages, electricity or stationery.
- ‘Top-ups’ received in addition to CDEP payments.
These top-ups are payments for work outside the CDEP program.
These types of payments are referred to as ‘non-CDEP payments’.
Your withholding requirements
If you have employees, you are required to withhold an amount from payments you make to them. You may have to withhold an amount from payments to other workers such as contract workers. You also need to withhold an amount from payments to other businesses if they don’t quote their Australian business number (ABN) to you on an invoice (or other document if required). You send all withheld amounts to the Tax Office.
This is called ‘withholding’ and is done under the PAYG withholding system.
Under the PAYG withholding system, the individual or business paying the money is called the payer and the individual or business being paid is called the payee.
The Commissioner of Taxation has varied the amount to be withheld from payments to workers who receive CDEP payments. The variation takes effect from 1 November 2004.
This means that there are different withholding requirements for workers who only get CDEP payments and for workers whose wage is made up of both CDEP and non-CDEP payments.
If your organisation only makes CDEP payments to your workers
You are not required to withhold amounts from payments made to workers who only receive CDEP payments.
The Tax Office has varied the amount required to be withheld to nil because these workers will be entitled to a tax offset for tax payable on the CDEP component.
You will not need to collect a tax file number declaration from these workers.
If your organisation makes both CDEP and non-CDEP payments to your workers
If your organisation makes CDEP and non-CDEP payments to your workers as part of their salary and wages, you will need to withhold amounts from their pay.
Tax file number declarations
Workers who receive both CDEP and non-CDEP payments will also need to complete a Tax file number declaration within 14 days of commencing work. Once the TFN declaration is provided, you should:
- complete section B of the original of the declaration
- send the original to the Tax Office within 14 days of the declaration being made, and
- keep a copy of the declaration for your records.
You will need to notify the Tax Office if a worker has not given you their TFN declaration within 14 days of starting work.
If the worker states at question 1 of their TFN declaration that they have lodged a TFN application or enquiry with the Tax Office, they have 28 days to give you their TFN.
If the worker has not given you their TFN after 28 days, you must withhold 48.5% of only the non-CDEP component of the payment (unless the Tax Office tells you not to).
How to work out the amount to withhold from payments to your workers
If you don’t pay your workers weekly, you will need to know your worker’s weekly CDEP and non-CDEP payments to correctly calculate the withholding amount. See What to do if your workers are paid fortnightly, monthly or quarterly to see how to convert payments into weekly amounts. |
Step | Instructions |
1 | Add the gross amount of both CDEP and non-CDEP payments. Round this figure to the nearest dollar. |
2 | Use the Pay as you go (PAYG) withholding tax tables – weekly (NAT 1005) to find the worker’s total weekly income in the ‘weekly earnings’ column (column 1). Select the corresponding column to find the correct amount to be withheld, as follows:
use column 4 if the worker is not claiming the tax-free threshold. |
3 | Use the CDEP calculation table to find the participant’s total weekly CDEP payment in column A (CDEP weekly earnings). |
4 | Use column B of the CDEP calculation table to find the applicable withholding reduction amount to the CDEP payment. |
5 | Subtract the amount in step 4 from step 2 to find the correct weekly amount to withhold. |
6 | If your pay period is fortnightly, monthly or quarterly you will need to convert the weekly amount to the relevant pay period. See How to work out the amount to withhold from fortnightly, monthly or quarterly payments. |
Example
Albert’s weekly wage is made up of a $200 CDEP payment and a $230 non-CDEP payment. He has claimed the tax-free threshold on his TFN declaration and does not receive leave loading.
Step | Instruction | Result |
1 | Weekly gross amount: $200 + $230 | $430 |
2 | Using Pay as you go (PAYG) withholding tax tables – weekly (NAT 1005): Total weekly earnings – column 1: $430 In this example we use column 3 to determine the amount to withhold: | $63 |
3 | Using the CDEP calculation table find the CDEP payment: | $200 |
4 | Using the CDEP calculation table find the withholding reduction amount in column B: | $14 |
5 | Subtract step 4 from step 2: $63 - $14 | $49 |
The correct amount to withhold on the payee’s gross amount is $49.
This example uses figures which are current for the 2004-05 financial year. |
What to do if your workers are paid fortnightly, monthly or quarterly
If you pay your workers fortnightly, monthly or quarterly you will need to convert their total payment and the CDEP payment (only) into weekly amounts, using the following methods:
Pay period | Instructions | Working |
Fortnightly | Divide the sum of the fortnightly income and the amount of any allowances subject to withholding by two. | Fortnightly income + allowances |
Monthly | Get the sum of the monthly income and the amount of any allowances subject to withholding (if the result is an amount ending in 33 cents add 1 cent), multiply this amount by 3 and divide by 13. | (monthly income + allowances) X 3 |
Quarterly | Divide the sum of the quarterly income and the amount of any allowances subject to withholding by 13. | Quarterly income + allowances |
Note: Cents should be disregarded when calculating the final weekly amounts. | ||
Once you have worked out the weekly amounts (total income and individual CDEP income) you can work out the amount to withhold from the worker’s weekly income. See How to work out the amount to withhold from payments to your workers.
How to work out the amount to withhold from fortnightly, monthly or quarterly payments
Once you have worked out the withholding amount for your worker’s weekly income, you will need to work out the amount to withhold from each pay. You will need to convert the weekly withholding amount into a fortnightly, monthly, or quarterly withholding amount.
Do this by following the methods below:
Pay period | Instructions | Working |
Fortnightly | Multiply the weekly withholding amount by two. | Weekly withholding amount x 2 |
Monthly | Multiply the weekly withholding amount by 13 and divide by three. | Weekly withholding amount x 13 |
Quarterly | Multiply the weekly withholding amount by 13. | Weekly withholding amount x 13 |
Example
Marion’s monthly wage is made up of a $950 CDEP payment and a $1,120 non-CDEP payment. She has claimed the tax-free threshold on her tax file number declaration and does not receive leave loading.
Step | Instruction | Result |
1 | Convert the monthly total payment into a weekly amount [(monthly income + allowance) x 3] ÷ 13 = [(950 + 1120) x 3] ÷ 13 = [(2070) x 3] ÷ 13 = 6210 ÷ 13 = $477.69 = $477 | $477 |
2 | Convert the monthly CDEP payment into a weekly amount = (950 x 3) ÷ 13 = 2850 ÷ 13 = $219.23 = $219 | $219 |
3 | Use the Pay as you go (PAYG) withholding tax tables – weekly to find the worker’s total weekly income in the ‘weekly earnings’ column (column 1) Total weekly earnings: $477 In this example we use column 3 to determine the amount to withhold: $78 | $78 |
4 | Using the CDEP calculation table find the CDEP payment | $219 |
5 | Using the CDEP calculation table find the withholding reduction amount in column B | $17 |
6 | Subtract step 5 from step 3: $78 - $17 | $61 |
7 | Convert the weekly withholding amount into a monthly withholding amount [(weekly withholding amount x 13) ÷ 3] = ($61 x 13) ÷ 3 = 793 ÷ 3 = $264.33 = $264 | $264 |
The correct amount to withhold on Marion’s gross payment amount of $2,070 is $264. | ||
Payroll software formula for calculating the amount to withhold
If you are a software developer, or would like to use a payroll software program to calculate the amount to withhold from salary and wages, you can use the following mathematical formula:
The following formula is only relevant where a worker receives both CDEP and non-CDEP amounts as part of their wages. |
A = (C – 115)/6
A is the CDEP calculated amount expressed in dollars, and
C is the weekly earnings or the worker’s CDEP amount.
You will also need to use the PAYG statement of formulas for calculating amounts to be withheld (NAT 1004).
Software programs
Software programs written in accordance with the above formula should be tested for accuracy against the CDEP calculation table and used only when they produce the exact amounts shown in the table.
Rounding of amounts withheld
The reduction amounts should be rounded to the nearest dollar. Values terminating in exactly fifty cents are rounded to the next highest dollar.
Where the reduction amount calculated is less than zero the amount is rounded to zero.
CDEP calculation table
Use this table to find the withholding reduction amount for a worker who receives both CDEP and non-CDEP payments. The earnings provided in the table below includes most CDEP earning amounts. If the earnings amount is not included, please follow the notes.
Column A CDEP weekly earnings $ | Column B Withholding reduction amount $ | Column A CDEP weekly earnings $ | Column B Withholding reduction amount $ |
115 | 0 | 322 | 35 |
118 | 1 | 328 | 36 |
124 | 2 | 334 | 37 |
130 | 3 | 340 | 38 |
136 | 4 | 346 | 39 |
142 | 5 | 352 | 40 |
148 | 6 | 358 | 41 |
154 | 7 | 364 | 42 |
160 | 8 | 370 | 43 |
166 | 9 | 376 | 44 |
172 | 10 | 382 | 45 |
178 | 11 | 388 | 46 |
184 | 12 | 394 | 47 |
190 | 13 | 400 | 48 |
196 | 14 | 406 | 49 |
202 | 15 | 412 | 50 |
208 | 16 | 418 | 51 |
214 | 17 | 424 | 52 |
220 | 18 | 430 | 53 |
226 | 19 | 436 | 54 |
232 | 20 | 442 | 55 |
238 | 21 | 448 | 56 |
244 | 22 | 454 | 57 |
250 | 23 | 460 | 58 |
256 | 24 | 466 | 59 |
262 | 25 | 472 | 60 |
268 | 26 | 478 | 61 |
274 | 27 | 484 | 62 |
280 | 28 | 490 | 63 |
286 | 29 | 496 | 64 |
292 | 30 | 502 | 65 |
298 | 31 | 508 | 66 |
304 | 32 | 514 | 67 |
310 | 33 | 520 | 68 |
316 | 34 |
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Notes:
- If a CDEP payment is less than $115, the withholding reduction amount is $0.
- If the CDEP payment is between the listed amounts above, use the lower dollar amount to find the withholding reduction amount.
- The CDEP weekly earnings above cover the wages of most participants. If the participant earns more than $520 a week, you will need to use the mathematical formula to calculate the withholding reduction amount.
More information
- phone 13 28 66, or
- phone the National Aboriginal and Islander resource centre on 13 10 30.
- of the weekly and fortnightly tax tables are available from most newsagents. Newsagents also hold tax file number declarations and withholding declarations.
Last Modified: Thursday, 14 October 2004
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