5.3.1.10 Taxation of payments & PAYG payment summary - individual non-business

Summary

Services Australia is responsible for calculating the amount of taxable payments it makes to a recipient in a financial year. The formula for establishing the taxable component of a payment is:

Rate payable − any non-taxable payments = taxable component.

Explanation: The amount of tax a recipient must pay depends on their taxable income (see the definition of taxable income in SSAct subsection 23(1)) for the financial year. A recipient's expected or possible taxation liability is SOLELY a matter between the recipient and the ATO. Any inquiries regarding either the ATO's requirements or tax assessments should be referred to the ATO.

Note: Tax treatment of payments made in the case of bereavement may differ due to special rules that apply.

Act reference: SSAct section 23(1) Dictionary

Taxable payments

The following table shows which payments are taxable under each payment type.

Payment group	Taxable payments
JSP & YA	jobseeker payment YA when the recipient is over 16
Other labour market & older students	ABSTUDY living allowance when the recipient is over 16 Austudy
Retirement & widows	age pension age pension (blind) widow allowance (ceased 1 January 2022)
Families & parenting	dad and partner pay parental leave pay PP (1.2.4.10) partner allowance (ceased 1 January 2022)
Disability & carer	CP if either the recipient or the care receiver (1.1.C.20) is of age pension age DSP if recipient is of age pension age
Special payments	special benefit
Supplementary benefits	bereavement lump sum payments above the tax-free amount education entry payment pension supplement basic amount youth disability supplement (paid with YA or ABSTUDY living allowance when the recipient is over 16)

Act reference: SSAct section 23(5A) to (5D) Pension age, section 236A Lump sum payable in some circumstances

Non-taxable payments

The following table shows which payments are NOT taxable under each payment type.

Payment group	Non-taxable payments
JSP & YA	YA payments made when recipient under 16
Other labour market & older students	ABSTUDY living allowance when recipient under 16
Retirement & widows	pension bonus scheme pension loans scheme
Families & parenting	baby bonus CCS and additional child care subsidy double orphan (1.1.D.240) pension FTB Part A including RA, multiple birth allowance FTB Part B maternity immunisation allowance newborn upfront payment stillborn baby payment
Disability & carer	carer allowance CP if both the recipient and the care receiver are under age pension age, or if a lump sum is paid under SSAct section 236A because of the death of the care receiver, CP is tax exempt up to the tax free amount carer supplement child disability assistance payment DSP if recipient is under age pension age DSP (blind) if recipient is under age pension age incentive allowance mobility allowance
Special payments	Australian Government Disaster Recovery Payment crisis payment
Supplementary benefits	ABSTUDY supplementary benefits AIC Scheme allowances baby bonus bereavement lump sum payments up to the tax-free amount energy supplement fares allowance LLNS (Note: LLNS is not added back to taxable income for income testing purposes for FTB or CCS.) large family supplement newborn supplement pensioner education supplement pharmaceutical allowance quarterly pension supplement RAA (offsets the Zone Tax Rebate) rent assistance the tax exempt pension supplement amount telephone allowance utilities allowance youth disability supplement (when paid to DSP recipients under 21, or YA and ABSTUDY recipients under 16)

While RAA is non-taxable, on a dollar for dollar basis it reduces the recipient's tax offset. RAA recipients are notified of this on the back of their statement of pension or benefit.

Act reference: SSAct section 236A Lump sum payable in some circumstances

Non-taxable components

A recipient may be paid a number of different components that are non-taxable and are not related to tax offsets. At the request of ATO, from the 1999-00 financial year non-taxable add-on components are not reported on the PAYG payment summary - individual non-business. Only the non-taxable BASIC component is included in the tax exempt amount on the PAYG payment summary.

Exception: In certain circumstances, other components will appear in the tax exempt field. This occurs only when a component can either be taxable or non-taxable which is dependent upon the recipient's particular circumstances. This occurs for the following components:

Pensions	Basic supplement
ABSTUDY & ABSTUDY Schooling A	additional assistance basic to board provider basic to boarding school school fees allowance - Group 2 to school for board

PAYG payment summary - individual non-business

At the end of each financial year, recipients are automatically advised of the amount of taxable pension or benefit they received during the year.

Exception: If a recipient requests a duplicate PAYG payment summary, it is issued manually.

PAYG payment summary - individual non-business are issued to all recipients who have received either taxable payments and/or tax offset related components irrespective of whether tax has been deducted from payments. No statements of payment are issued. No PAYG payment summary is issued to recipients who receive a payment that is not taxable. PAYG payment summaries can be issued manually to recipients who have only received a non-taxable pension.

Payments transferred interstate

Each state issues PAYG payment summaries for all payments in that state. Tax details of recipients who move interstate are sent to the receiving state and included in that state's issue.

Act reference: Income Tax Assessment Act 1997 section 51-10 Education and training, Subdivision 52-A Exempt payments under the Social Security Act 1991, Subdivision 52-E Exempt payments under the ABSTUDY scheme