Overview

The Australian Taxation Office (ATO) is very clear about the need for a tax file number (TFN) and as an employer you need to ensure that you have 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. These are called Special Tax File Numbers and below are the instructions on how to set them for your employees.

Access the TFN
Special Tax File Numbers
Change employee's special TFN after 28 days if no TFN provided.
Bulk update Special Tax File Numbers
How is an employee's earnings taxed when using the special TFN 000000000?
When does the system apply the highest tax rate?

Getting Started

Access the TFN

To access an employee's TFN and change it to a Special Tax File Number, follow these steps:

1. Log into your Employment Hero Payroll platform. 
2. Click on the employee's name you wish to select a Special TFN for.
3. On the Employee Details page, navigate to the Employee Settings menu. 
4. Select Tax File Declaration.
5. Under the TFN field, click I don't have a tax file number for this employee.
6. This provides you with several options for which Special TFN you can select. 
7. Click Save.

Special Tax File Numbers

Below is a list of Special tax file numbers that are made available by the ATO that are fully supported in the payroll platform:

000000000 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 or enquired about a TFN with the ATO and failed to provide a TFN within 28 days.

If you select the option The employee didn’t quote a TFN on the employer's Tax File Declaration screen, 000000000 will be the TFN set for the employee.

Helpful Hint

An employer is required to withhold the top rate of tax (currently 47%, which includes the 2% medicare levy) from all earnings paid to an Australian resident employee using this special TFN. Refer below for detailed information on how employee earnings are taxed when using this special TFN. This rule excludes foreign residents, employees engaged in the seasonal worker program and working holiday makers.

111111111

This substitute number is allowed where an employee:

• has not provided a TFN but has indicated on the TFN declaration that they have applied 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, 111111111 will be the TFN set for the employee.

333333333 – 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 $1517 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, 333333333 will be the TFN set for the employee.

444444444

This substitute number is allowed where an employee is 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 (such as receiving a social security or service pension) on the employer's Tax File Declaration screen, 444444444 will be the TFN set for the employee.

Helpful Hint

For employment termination payments, in the event the payment is due to the death of an employee, show either the TFN of the trustee for the deceased estate or the TFN of the dependant or non dependant of the deceased employee, whichever is applicable.

Change employee's special TFN after 28 days if no TFN provided.

An employee who has applied 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 the valid TFN is provided.

Any employee that falls outside of the 28 day period will be identified and listed on your payroll dashboard.

The 28 day period is counted 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. Log into your Employment Hero Payroll platform. 
2. Click on the employee's name you wish to select a Special TFN for. 
3. On the Employee Details page, navigate to the Employee Settings menu. 
4. Select Tax File Declaration.  
5. Under the TFN field, click I don't have a tax file number for this employee. 
6. Click on the The employee didn’t quote a TFN checkbox. 
7. Click Save. 

Bulk update Special Tax File Numbers

You can bulk update employee records by exporting the employee data extract, entering 000000000 in the TaxFileNumber column (ensure the cells are formatted as text) and importing back into the platform. Refer below for detailed information on how an employee's earnings are taxed when the special TFN 000000000 is applied against their record.

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

Any employee, whose special TFN is recorded as 000000000, 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 is counted 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.

Helpful Hint

If you do not want the highest tax rate applied to the employee after the 28 days, simply change their special TFN from 000000000 to 111111111.

When does the system apply the highest tax rate?

The higher tax rate will be applied in the first pay run with a date paid that is after 28 days. For eg, an employee has 13/7/20 recorded as the "Date Signed" value. The 28 day countdown commences from 14/7/20 and ends on 10/8/20. The employee is paid weekly, on the following pay schedules and 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 (ie 11/8/20) is after 28 days (ie 10/8/20). Also, be aware that the highest tax rate will apply to all earnings in the pay run. There is no pro-rata calculation.