The Australian Tax Office (ATO) is very clear about the need for a tax file number (TFN) and as an employer you need to make sure that you have the up-to date tax file numbers for your employees. The ATO provides specific guidance on how software should handle tax file numbers in circumstances where you are unable to provide a tax file number for an employee.

Glossary

• Special tax file numbers
  • 000000000
  • 111111111 
  • 333333333 
  • 444444444
• Change special TFN after 28 days if no TFN provided.
• Bulk update special TFNs
• How is an employee's earnings taxed when using the special TFN 000000000?
• When does the platform apply the highest tax rate?

Special tax file numbers

Below is a list of special tax file numbers made available by the ATO and which we fully support in the Payroll classic platform:

000000000

Use of this substitute number is allowed where an employee has:

• Not completed a TFN declaration; or
• Completed a TFN declaration and chosen not to quote a TFN; or
• Indicated that they applied for or enquired about a TFN with the ATO and didn't provide a TFN within 28 days.

If you select the option The Employee Did not Quote a TFN on the employer's Tax File Declaration screen, we will set the employees TFN as 000000000.

111111111 

Use of this substitute number is allowed where an employee has:

• Has not provided a TFN but has indicated on the TFN declaration that they have applied for or enquired about a TFN with the ATO, or
• Has provided an invalid TFN.

If you select the option The Employee has Applied for a TFN but Doesn’t Have It Yet or The Employee Quoted an Invalid TFN on the employer's Tax File Declaration screen, we will set the employees TFN as 111111111.

333333333 

Use of this substitute number is allowed where an employee is under the age of eighteen and earns $350 or less weekly; earns $700 or less fortnightly, or earns $1,517 or less monthly. If you select the option The Employee is Under 18 and Earns Less than the Current Limit on the Employer's Tax File Declaration screen, we will set the employees TFN as 333333333.

444444444

Use of this substitute number is allowed where a recipient of a social security or service pension or benefit other than Newstart, sickness allowance, special benefits or partner allowance, and so has claimed an exemption from quoting a TFN. If you select the option The Employee has Claimed an Exemption from Quoting a TFN on the Employer's Tax File Declaration screen, we will set the employees TFN as 444444444.

Change special TFN after 28 days if no TFN provided.

An employee who has applied for or enquired about a TFN with the ATO, as declared on their TFN form, has a 28-day period where the employer must tax the employee's earnings at the standard rate. If, after 28 days, the employee has not yet provided their TFN to the employer, the employer is required to withhold the top rate of tax from all earnings paid to an employee up until they provide a valid TFN. Any employee that falls outside the 28-day period we will show on your Payroll dashboard.

The 28-day period counts from the date entered in the Date Signed field in the employee's Tax File Declaration screen. If there is no value in that field, the 28 days will start from the employees' recorded start date. At this stage, you can choose to change the employees' special TFN from 111111111 to 000000000.

1. From the Payroll dashboard, click on the employee's name so that you are directed to the employee's Tax File Declaration screen.
2. Click on the The employee Didn’t quote a TFN checkbox.
3. Click the Save button.

Doing this will automatically change the employee's special TFN to 000000000.

Bulk update special TFNs

You can bulk update employee records by exporting the employee data extract, entering 000000000 in the TaxFileNumber column, making sure the cells are formatted as text, and importing back into the Payroll classic platform.

How is an employee's earnings taxed when using the special TFN 000000000?

Any employee, whose special TFN has 000000000 selected, will have their earnings taxed at the standard tax rate applicable to the tax calculation options defined by the employee's tax declaration for the first 28 days. The 28-day period counts from the date entered in the Date Signed field in the employee's Tax File Declaration screen. If there is no value in that field, the 28 days will start from the employees' recorded start date.

Thereafter, if the employee's TFN is still recorded as 000000000, the employee's earnings will be taxed at the highest tax rate, being 47%. This tax rate will continue to apply until a valid TFN is recorded against the employee.

When does the platform apply the highest tax rate?

We will apply the higher tax rate in the first pay run with a date paid that is after 28 days. For example, an employee has 13/7/20 recorded as the Date Signed value. The 28-day countdown starts from the 14/7/20 and ends on 10/8/20. The employee receives a weekly pay, on the following pay schedules and is taxed as follows:

• Pay period 27/07/2020 to 2/08/2020• Paid date 4/08/2020 • Marginal tax rate
• Pay period 3/08/2020 to 9/08/2020>• Paid date 11/08/2020 • Higher tax rate
• Pay period 10/08/2020 to 16/08/2020• Paid date 18/08/2020• Higher tax rate

The employee's tax rate increases in the pay run with pay period 3/08/2020 to 9/08/2020 because the pay run pay date, i.e. 11/8/20, is after 28 days, i.e., 10/8/20. Also, be aware that the highest tax rate will apply to all earnings in the pay run and there is no pro-rata calculation.