Document ID: chunk:federal_register_of_legislation:F2024L00664:schedule:13:p10
Version: federal_register_of_legislation:F2024L00664
Segment Type: schedule
Provision Reference: sch 13 (pt 10/23)
Character Range: 266792–269483

element
Yes                       Yes                Yes              Equal to or greater than the defined benefit income cap  Go to step 2
Yes                       Yes                Yes              Less than the defined benefit income cap                 Go to part C (untaxed component)

Step 2: Add the annualised tax-free component and annualised taxed element. Subtract the cap from this amount. If this is less than the cap, go to step 5.

Step 3: Calculate the weekly, fortnightly or monthly equivalent of the amount at step 2. For example, if you pay the payee weekly, divide the excess by 52. If you pay fortnightly, divide the excess by 26. If you pay monthly, divide the excess by 12 (ignore cents in the result).

Step 4: Divide the amount calculated at step 3 by two (ignore cents in the result). The result is the amount subject to withholding.

Step 5: Calculate the weekly, fortnightly or monthly equivalent of the untaxed element and add this to the amount calculated at step 4 (if applicable).

Step 6: Use the appropriate PAYG withholding tax table at ato.gov.au/taxtables to calculate the withholding amount relevant to the amount worked out in step 5. The tax table you use depends on the period the income stream covers – that is, weekly, fortnightly or monthly.

Calculate the tax offset applicable

Step 7: If the sum of the annualised tax-free component and the annualised taxed element is equal or greater than the cap, then the payee is not entitled to a tax offset.

If the sum of the annualised tax-free component and the annualised taxed element is less than the cap, the payee is entitled to a reduced tax offset. Subtract from the cap the sum of the tax-free component and the taxed element from step 2 and apply 10% to this amount. The result is the annual tax offset amount.

Calculate the weekly, fortnightly or monthly equivalent of this tax offset. For example, if you pay the payee weekly, divide the amount by 52. If you pay fortnightly, divide the amount by 26. If you pay monthly, divide the amount by 12 (ignore cents in the result).

Work out the amount to withhold

Step 8: Subtract the tax offset per payment (step 7) from the withholding amount (step 6).

  Amount to withhold = withholding amount − tax offset

These examples use the PAYG withholding tax tables that apply from 1 July 2024.
Example: Case D (i) - Payee is over 60 years old and receives all elements of a capped defined benefit income stream

Nancy, 75, receives a capped defined benefit income stream for the financial year of $212,000 comprising of the annualised:

    * taxable component – taxed element $120,000
    * taxable component – untaxed element $62,000
    *