Tax File Numbers
As a taxpayer, you are required to have a tax file number (TFN). Apart from serving as a means of identification of individual taxpayers, the number also helps the ATO in its collection of tax from revenue that may otherwise escape the tax net.
If you are an employee, you are required to provide your employer with your TFN and, subject to some exceptions, you may choose to quote the TFN to investment bodies, such as banks, credit unions, building societies and companies issuing dividends. Unless an exemption applies, if you do not quote your TFN, tax will be deducted from interest and dividend payments at the highest marginal tax rate plus the Medicare levy under the PAYG system. The amount of tax deducted will reduce the amount of tax payable on your taxable income, but will not be refunded until an income tax return for the year is lodged.
Trustees of closely held trusts are required to lodge a TFN report by the end of the month following the quarter in which any new TFNs are notified to the trustees. In relation to year end distributions, TFN reports must be lodged by 31 July. Failure to report this information to the Commissioner is an offence and may result in a fine of up to $2,200 for a first offence.
If a beneficiary has not notified the trustee of their TFN either verbally or in writing before a ‘payment’ is made to them, including both a distribution of income of the trust or present entitlement, the trustee must withhold tax on that payment at a rate of 46.5%. The trustee will need to apply for PAYG withholding, and lodge an Annual TFN Withholding Report by 30 September. Withheld amounts must be paid to the ATO by 28 October. The beneficiary can then claim a credit in their income tax return for any amounts withheld.