Tax Treatment Code

The Tax Treatment Code is used to indicate the PAYGW tax scale and other components that have been applied by the payer when determining payee taxation withholding amounts.

This code is made up of 6 individual characters that are derived from various pieces of data. The first 2 characters must have specific values reported for every employee. Characters 3 to 6 are only reported for specific employee situations, otherwise they are reported with a value of ‘X’.

A description of the reportable values is as follows:

STP Category - Character 1

The first character of the tax treatment code represents the tax table or schedule of withholding rates. Valid categories are:

· R - Regular

· S - Seniors and Pensioners

· H - Working Holiday Makers

· F - Foreign Resident

· N - No TFN

· D - ATO-Defined

· V - Voluntary Agreement

A default STP Category will be determined based on the existing ‘Income Type’ code recorded in the ‘FC024 - Employee Job Record’ form in conjunction with whether an employee has a tax file number or a non-resident tax scale. The following table shows the default values assigned.

Default STP Category	FC024 Employee Job ATO Income Type
R - Regular	S - Salary and Wages
R - Regular	F - Foreign Employment Income
R - Regular	C - Closely Held Payees
R - Regular	I - Inbound Assignees Australia
R - Regular	P - Seniors and Pensioners
R - Regular	A - Attributed Income
H - Working Holiday Makers	H - Working Holiday Makers
V - Voluntary Agreement	V - Voluntary Agreement

Under specific situations the following STP category codes are required to be reported:

STP Category Code	Description
D - ATO Defined	This category must be manually set in the ‘FC788 - STP Details’ form when: making a payment to a death beneficiary who is not an employee an employee has a downward variation applied to their PAYG withholding rate as a result of a letter from the ATO specifying a lower rate of taxation is to be applied making a payment to a non-employee having only superannuation amounts to be reported
N - No TFN	A STP Category of ‘N’ will be defaulted where an employee has no Tax File Number (TFN) or the TFN entered is 000000000.
F - Foreign Resident	A STP Category of ‘F’ will be defaulted if an employee has a non-resident tax scale and their ATO Income Type is not ‘H’.

Where the default value is not correct for a particular employee or a category of ‘D - ATO Defined’ is required, then an override ‘STP Category’ must be entered in the ‘FC788 - STP Details’ form. An ‘STP Category’ code entered for an employee in FC788 will override the default value calculated by RG850.

The following table is provided by the ATO to indicate what tax treatment categories are permissible for each Income Type:

Table 1: Tax Treatment Code Permissibilities by Income Type

Tax Treatment Category	SAW	CHP	IAA	WHM	SWP	FEI	VOL	LAB	OSP
R - Regular	Y	Y	Y			Y		Y	Y
A - Actors	Y	Y	Y			Y		Y	Y
C - Horticulturists and Shearers	Y	Y				Y		Y
S - Seniors and Pensioners	Y	Y				Y		Y	Y
H - Working Holiday Makers				Y
W - Seasonal Worker Programme					Y
F - Foreign Resident	Y	Y	Y					Y	Y
N - No TFN	Y	Y	Y			Y		Y	Y
D - ATO-Defined	Y	Y	Y			Y		Y	Y
V - Voluntary Agreement							Y

Options - Character 2

The second character of the tax treatment code represents the options per Category of tax scales. Valid codes are as follows:

STP Options Category Code	Description
T	Represents whether employee is claiming the Tax-Free Threshold	If STP Category Code for an employee is ‘R - Regular’, then value is selected from the TFN Declaration record in ‘FC795 - Employee Pay Distribution and Taxation’ form. If the ‘Claiming the Tax Free Threshold’ checkbox is set, then a ‘T’ will be reported. Note, if no TFN Declaration record exists then this will default to reporting employee as not claiming the tax free threshold and a warning will appear on the RG850 report. If an employee is claiming the tax free threshold then a TFN Declaration record must be entered into the FC795 TFN Declaration tab.
N	Represents employee is claiming the Tax-Free Threshold	If STP Category Code for an employee is ‘R - Regular’, then value is selected from TFN Declaration record in ‘FC795 - Employee Pay Distribution and Taxation’ form. If the ‘Claiming the Tax Free Threshold’ checkbox is not set or no TFN Declaration record exists for the employee, then a ‘N’ will be reported.
F	Represents Foreign Resident for tax purposes	If No Tax File Number recorded for employee (TFN is blank or 000000000) and their taxation record has the non-resident tax scale as defined in FA003 Kind code STP_DEF against setting TAXSCL_NONRESIDENT.
A	Represents Australian Resident for tax purposes	If employee taxation record does not have the non-resident tax scale as defined in FA003 Kind code STP_DEF against setting TAXSCL_NONRESIDENT or if employee does not have taxation record.
R	Represents if Working Holiday Maker and company is registered for working holiday makers with the ATO.	If employee is defined as a working holiday maker and the company record employee is attached to has the checkbox for ‘WHM Registered’ selected in ‘FC426 - Company Details’, then ‘R’ will be reported.
U	Represents if Working Holiday Maker and company is not registered for working holiday makers with the ATO.	If employee is defined as a working holiday maker and the company record employee is attached to does not have the checkbox for ‘WHM Registered’ selected in ‘FC426 - Company Details’, then ‘U’ will be reported.
B	Represents if Death Beneficiary where STP Category is ATO Defined.	If employee is defined with an STP Category of ‘D - ATO Defined’ and the ‘Death Beneficiary’ checkbox is selected in form in ‘FC788 - STP Details’.
V	Represents if Downward Variation where STP Category is ATO Defined.	If employee is defined with an STP Category of ‘D - ATO Defined’ and the ‘Downward Variation’ checkbox is selected in form in ‘FC788 - STP Details’.
Z	Represents if Non Employee where STP Category is ATO Defined.	If employee is defined with an STP Category of ‘D - ATO Defined’ and the ‘Employment Basis’ is set to ‘N - Non-Employee’ in form in ‘FC788 - STP Details’.
S	Represents if employee is taxed as Single on Senior Australian tax scales.	If employee taxation record has a tax scale matching the scale defined in FA003 Kind code STP_DEF against setting TAXSCL_SINGLE.
I	Represents if employee is taxed as Illness on Senior Australian tax scales.	If employee taxation record has a tax scale matching the scale defined in FA003 Kind code STP_DEF against setting TAXSCL_ILLNESS.
M	Represents if employee is taxed as Member of a Couple on Senior Australian tax scales.	If employee taxation record has a tax scale matching the scale defined in FA003 Kind code STP_DEF against setting TAXSCL_COUPLE.

Study Training Support Loans - Character 3

The third character of the tax treatment code represents whether the employee has an obligation to repay a higher rate of withholding taxation for support loans when income thresholds are reached.

Where the ‘Student Loan’ checkbox is set on the FC795 TFN Declaration tab for an employee then this will be reported as an ‘S’, else will be reported as ‘X’.

Medicare Levy Surcharge - Character 4

The fourth character of the tax treatment code represents additional rates of Medicare Levy imposed on those who do not have an appropriate level of private patient hospital cover and earn above a certain income.

This must be manually entered for each employee where this applies by entering a value in the field ‘Medicare Levy Surcharge Tier’ in form ‘FC788 - STP Details’. The field has a drop down box option to select a value of 1, 2 or 3. If no value selected then will report as ‘X’.

Note, this is for reporting purposes only, setting this field will not affect the taxation rate that is calculated by aPay. To deduct additional taxation the employee taxation record in FC795 must be defined with an additional percentage or amount value.

Medicare Levy Exemption - Character 5

The fifth character of the tax treatment code represents the full or half exemption from Medicare Levy for those who meet certain medical requirements; are a foreign resident; or are not entitled to Medicare benefits.

Valid options are ‘H’ - Half or ‘F’ - Full. If no value then will report as ‘X’.

This value will be calculated by RG850 based on the employee tax scale entered in the FC795 Taxation tab. If the employee taxation scale matches the tax scale entered against the STP_DEF setting TAXSCL_FULL_EXEMPT then this will be reported as ‘F’. If the employee taxation scale matches the tax scale entered against the STP_DEF setting TAXSCL_HALF_EXEMPT then this will be reported as ‘H’.

Medicare Levy Reduction - Character 6

The sixth character of the tax treatment code represents a reduction in the rate of Medicare Levy based on family taxable income below a certain threshold and consideration of the number of dependants, if any.

This must be manually entered for each employee in ‘FC788 - STP Details’ where it applies by setting the checkbox field ‘Medicare Levy Reduction’ and entering the number of dependants in the ‘Medicare Reduction Dependants’ field. The number of dependants may be entered as a number between 1 and 9 or ‘A’ for 10 or more. A value of 0 should be entered if is spouse only. If no value then RG850 will report value as ‘X’.

Note, this is for reporting purposes only, setting field will not affect the taxation rate calculated by aPay.

Tax Treatment Code Example

Employee has an ATO Income Type on Job record of Salary and Wages. Employee has claimed Tax Free Threshold on TFN Declaration record in FC795. Employee does not have any record entered in FC788. Employee tax treatment would be reported as RTXXXX.

Employee has an ATO Income Type on Job record of Salary and Wages. Employee has claimed Tax Free Threshold on TFN Declaration record in FC795 and has indicated they have a study loan. Employee does not have any record entered in FC788. Employee tax treatment would be reported as RTSXXX.

Employee has an ATO Income Type on Job record of Working Holiday Maker. FC426 Company record is as being registered for working holiday makers. Employee tax treatment would be reported as HRXXXX.

Tax Treatment Valid Combinations

The Tax Treatment Code must begin with one of the following: RT, RD, RN, AT, AN, AD, AP, SS, SM, SI, HR, HU, CT, CF, HF, WP, FF, NF, NA, DB, DV, DZ, VC, or VO to be valid.

The below ATO supplied table best represents valid combinations of the tax treatment code. This validation will be applied in RG850 to ensure incorrect combinations are not reported for STP.

Tax Treatment Permissions (Source: ATO BIG document)

Category	Option	STSL	ML Surcharge	ML Exemption	ML Reduction
Regular	Tax-Free Threshold No Tax-Free Threshold Daily Casuals	Permissible (not for Daily Casuals)	Permissible (not for Daily Casuals or No Tax-Free Threshold)	Permissible (not for Daily Casuals or No Tax-Free Threshold)	Permissible (not for Daily Casuals or No Tax-Free Threshold)
Seniors and Pensioners	Single Member of a couple Illness separated	Permissible	Permissible	Permissible	Permissible (no spouse option for Singles)
Working Holiday Makers	Registered payer Unregistered payer No TFN - foreign res.	Not Permitted	Not Permitted	Not Permitted	Not Permitted
Foreign Resident	Foreign Resident	Permissible	Not Permitted	Not Permitted	Not Permitted
No TFN	Foreign Resident Australian Resident	Not Permitted	Not Permitted	Not Permitted	Not Permitted
ATO-Defined	Downwards Variation Death Beneficiaries Non-Employee	Not Permitted	Not Permitted	Not Permitted	Not Permitted
Voluntary Agreement	Commissioner’s Instalment Rate No Commissioner’s Instalment Rate	Not Permitted	Not Permitted	Not Permitted	Not Permitted

Where an invalid combination is identified by RG850 it will be reported as an error message ‘Error: The Tax Treatment Code combination NASXXX is not valid for employee 000318’ and must be corrected before lodging with the ATO.