ATO Voluntary Withholding Agreement: What You Need to Know
If you`re an Australian taxpayer, you may have heard about the ATO voluntary withholding agreement. This is an arrangement between you and your employer to withhold a specific amount of tax from your income, over and above the standard amount. The aim is to ensure you don`t end up with a large tax bill at the end of the year, as the extra tax will have been paid in advance.
Here`s what you need to know about the ATO voluntary withholding agreement:
What is it?
The ATO voluntary withholding agreement is a formal arrangement between you and your employer to withhold a specific amount of tax from your income. This is in addition to the standard amount that is already withheld by your employer.
Why would you do it?
The main reason to enter into a voluntary withholding agreement is to avoid a large tax bill at the end of the year. By having additional tax withheld from your income throughout the year, you`ll reduce the likelihood of owing money to the ATO when you lodge your tax return.
How does it work?
To enter into the agreement, you`ll need to complete a form, which you can download from the ATO website. You`ll then give the completed form to your employer, who will be responsible for withholding the additional amount of tax from your income.
How much tax can you withhold?
There`s no set amount of tax you can withhold under a voluntary withholding agreement. However, there are some restrictions to be aware of. Firstly, you can`t withhold more than your actual tax liability. Secondly, if you`re earning more than $180,000 per year, you can`t withhold more than 10% of your income.
What are the benefits?
The main benefit of a voluntary withholding agreement is that it can help you avoid a large tax bill at the end of the year. It can also be helpful for those who have a side business or investment income, as it ensures that tax is being paid throughout the year rather than in a lump sum. Additionally, it can help you budget more effectively as you`ll know exactly how much tax is being withheld from each paycheck.
In conclusion, the ATO voluntary withholding agreement can be a useful tool for Australian taxpayers who want to avoid a large tax bill at the end of the year. By entering into the agreement with your employer, you`ll be able to have additional tax withheld from your income, which will reduce the likelihood of owing money to the ATO. If you`re interested in this arrangement, speak to your employer or visit the ATO website to get more information.