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ATO error forced employers to pay too much tax

Oops, error, mistake, typo, digital

The tax office has admitted to making an error on its tax withholding calculator, which may have caused some employers – especially microbusinesses – who used it to withhold more than what was required.

According to the Australian Tax Office (ATO), an error in its tax withheld calculator from 1 to 11 July 2018 affected the calculation of Higher Education Loan Program (HELP), Student Start-up Loan (SSL), Trade Support Loan (TSL) and Student Financial Supplement Scheme (SFSS), causing the amount of withholding calculated to be slightly higher than what was required.

“The error affected a small number of employees with a higher education loan debt and meant that a slightly higher amount was withheld from a pay occurring in the period from 1 to 11 July,” an ATO spokesperson told My Business’ sister publication Accountants Daily.

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“The dollar amount of any error is very small, but an employee may request a refund of the difference from their employer if they wish. The employer would then reduce a future payment to us by that refunded amount and adjust the employee’s payroll record accordingly.”

Accounting professionals believe the issue will not cause widespread material impact and will largely be contained to microbusinesses that rely on the calculator instead of payroll software.

Speaking to Accountants Daily, Sky Accountants chief technical officer Ashley Carmichael said businesses with more than one employee should avoid relying on the calculator apart from using it as a crosschecking reference.

“In my personal view, I don’t believe that anyone paying staff should be using this calculator because it might give you the tax to withhold, but it's a complicated area and there are obligations that need to be met, including maintaining employee leave and entitlements, records, providing payslips and being able to generate annual payment summaries, and all of those myriad things. So if you’re doing it manually, it makes it very time consuming and inefficient and subject to error,” said Mr Carmichael.

“If you've got staff, be professional about it and use a decent tool. What this should be used as, be [it] either employees or employers, [is] as a crosscheck.”

Likewise, Kevin San & Associates director Kevin San believes most employers would not be relying on the calculator as its main payroll tool.

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“Only a small portion of clients would do it the old-school way on spreadsheet or paper, but those clients are also the type to print out the PDF of the withholding tables, and not use the online tool,” said Mr San.

Mr San believes employees affected by the error will not have to worry much as they will eventually receive a refund in their tax return.

“The employee will receive less wages in the hand. However, it all comes out in the wash when they do their income tax return and receive a refund,” he said.

“For employers, the main impact is inconvenience. Some staff are extremely vigilant regarding their wages and so if the shortfall in net wages is enough to notice, then the employer may have to make amends by modifying a later pay run, which is easier said than done if you’re using payroll software and aren’t an expert on it.”

Adam Zuchetti

Adam Zuchetti

Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016. 

The two-time Publish Awards finalist has an extensive journalistic career across business, property and finance, including a four-year stint in the UK. Email Adam at This email address is being protected from spambots. You need JavaScript enabled to view it.

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