How to complete a TFN Declaration

April 6, 2021

TRANSCRIPT:

Hi guys, it’s Michelle Knight from Little Miss Bookkeeping.

Today I wanted to run through how to complete your Tax File Number declaration or TFN Declaration. More often than not I do see TFN Declarations get completed incorrectly, whether they’re by people who are starting jobs for the first time or they’ve been in the workforce for a number of years. I thought it would be a good idea to run through the form and make a few little pointers around why it’s important to get this right and hopefully help some people out who aren’t quite sure how to complete it correctly and where to find additional information. So, if you’re interested in learning more, please keep watching!

I have my lovely little TFN declaration here in front of me, which I printed off from the ATO website and we’re going to run through some really basic “What you need to knows”.

When do you complete a TFN Declaration?

Typically when you’re starting a new job, your employer will issue you with this form. Alternatively, they might send you a link to the ATO website where you can download the form and complete it yourself that way.  Generally, before you commence employment you will hand the completed form back to your employer or their accounts person/bookkeeper so that they can input that information into their payroll system, lodge that information with the ATO and then withhold the correct amount of tax connected to your wage/salary.

We’re going to run through the form, in particular the second last page which is the Tax File Declaration itself and go through some common mistakes that I typically see as an accountant.

Your TFN form looks like this, it’s about 6 pages long, and the first few pages are just some information about the form and some direction if you need some more information for a specific section of the form. If I flick through the first few pages this is what you’ll see before getting to the actual TFN form. And then there’s also some more additional information behind that one.

If you’ve been in the workforce for some time, you’ll be very familiar with this form however if you’re a young adult/teenager this may be the first time you’re filling this out. But this is the important one-pager that goes back to your employer.

The form is typically in two sections. The first section is going to be the information that you’ll complete as the employee. The second section is for your employer to complete, so you can ignore that section downwards under “To be completed by PAYER”.

Let’s get into the nuts and bolts of this form. Everything on the left-hand side is pretty much your personal details. If we have a quick read it will be asking you to complete your TFN number. I’m not going to go through in this video how to get your TFN number, that’s another conversation for another video, but typically you’ll already have this.

It’ll then ask for your name, your address, if you’ve had any other names, your email address and your date of birth. This next section is where I see people trip up or not quite understand what some of these questions mean. Let me run through items 7, 8, 9, and 10 in a little bit more detail just so you understand the questions that they’re asking and the information that you should be providing.

On what basis are you paid?

Full-time, part-time or casual employment. You might have an employment contract that specifies one of these options, if not check with your employer the basis that you’re hired on as it’s important that you get this part right.

Item number eight. It’s asking if you’re an Australian resident for tax purposes, foreign resident or working holiday maker. Now, again, it’s really important to select the appropriate box. Typically a lot of people are going to fall into the criteria of Australian Resident. You’ll know, or you should know, if you’re either going to be a foreign resident or a working holiday maker. Again, if you’re not sure, check! But I’m sure that you’re probably aware of which one you fall into.

Nine and ten. Now these ones are the most common questions that people get confused with. So I’ll quickly run through them in a little bit more detail.

Do you want to claim the tax-free threshold?

So what is the tax-free threshold? Right now, as I’m filming this in February 2021, the taxpayer threshold in Australia is, $18,200. So essentially if your taxable income is up to or under that amount, you won’t have to pay any tax. It’s important that we get this part of the form right, So if you have one job and you’re only going to be working one job, then you’ll be wanting to claim the tax free threshold because what happens is your employer, as part of their pay run, will tax you on the right amount of tax with your wages if you’re completing this form correctly.

There are instances where people have more than one job, they might have a few casual jobs or they might be doing a few different jobs. It’s going to be up to you to determine which job you want to claim your tax-free threshold on.

The issue that some people get into is they might have a couple of jobs and they’ll tick “Yes” to multiple employers. What then happens is those employers are not withholding enough tax for you. It then comes to end of financial year, and you’ll lodge a tax return and get a tax bill just because you haven’t completed this form correctly. So just be wary as it’s important to get to understand what this means. And it’s particularly important if you have more than one job you’re working at the same time.

Some people say “Oh, just don’t claim the tax-free threshold at all cause then you’re just going to get a big tax refund at the end of the year”. Technically yes in theory, that would happen. But do you want to be having more tax taken out in your net wage each week or each fortnight when you don’t need to? That’s what this means so just make sure you’re ticking the right box, especially if you’re working more than one job.

Do you have a Higher Education Loan Program (HELP), VET Student Loan (VSL), Financial Supplement (FS), Student Start Up Loan (SSL) or Trade Support Loan (TSL) debt?

For item 10, long story short – Do you have a government funded student loan?

For example, when I went to uni, I did HECS, which is now called HELP. So when I started my first job as an accountant, I had my HECS debt sitting there. And for this section I had to tick “Yes”. What happens is during the year, if you earn enough over the threshold you have to start repaying back you HELP debt through the tax system (Income threshold over $46,620, as of February 2021).

The problem is if you don’t complete this correctly, don’t quite understand what this means, and tick “No”, your employer is not going to be withholding enough tax in the year to meet your student loan requirement. And what I then see happen when someone lodges their tax return is, they come back with a tax debt because they didn’t complete this form correctly, their employer didn’t withhold enough tax and they have to have a bit of that tax payable for that financial year. So it’s important to understand what this question means. If you want to double check your HECS/HELP debts or student vet fees, you should be able to retrieve that data from your MyGov account online.

So I still currently have my HECS debt. If I want to see what that balance is currently, I can jump on my MyGov, login, my ATO is linked, and I can see what the current balance is.

Last but not least, you’ll sign the declaration, date it and hand it back to your employer.

That is pretty much the nuts and bolts of completing your TFN declaration. Again, if you have any questions, do seek the advice of a tax professional. This video is quite broad, so if you have any specific questions, please do seek the right advice.

I hope this video was helpful. If you did enjoy it, do please give it a thumbs up and subscribe to my channel. It does help me provide valuable content to you. Thanks for watching and I’ll see you in the next video.

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Nothing makes me happier than implementing time-saving tools and systems that help small businesses get ahead. Instead of being a cog in a large corporation, freelance consulting lets me be the adaptive Bookkeeper on the Sunshine Coast you need. Whatever your financial situation, I’ll help you find new approaches to cut unnecessary costs and alleviate undue pressure. If you’re ready to watch your business grow, let’s start a conversation

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