Application for Holdover of Provisional Tax

Yes. You should make an application within the prescribed time limit stated in Answer 8, state the ground for holdover as "entitlement to child allowance in 2023/24 and supply details including the name and date of birth of your child.

From what you have said, you may anticipate a drop of income to $600,000 for 2023/24.

The criterion for holding over is that your net chargeable income for the provisional tax year is less than 90% of that of the preceding year. Hence, it is necessary to ascertain your estimated net chargeable income for 2023/24 in order to consider whether you can apply for holding over of part of your provisional salaries tax. The net chargeable income is arrived at by deducting allowable deductions and allowances you are entitled to claim from your income.

The allowances granted to a single or married taxpayer is different, therefore, the situation will be different depending on whether you are single or married (assuming spouse having no income - you are entitled to claim Married Person´s Allowance). To demonstrate arithmetically:

Situation 1 - You are single 

As the estimated net chargeable income for 2023/24 is more than 90% of that of 2022/23 (that is, $468,000 > $466,200), no part of your provisional salaries tax for 2022/23 can be heldover. 

Situation 2 - You are married and your spouse has no income (you are entitled to Married Person´s Allowance)       

As the estimated net chargeable income for 2023/24 is less than 90% of that of 2022/23 (that is, $336,000 < $347,400), you can apply for part of your provisional salaries tax for 2023/24 to be heldover. 

Situation 3 - Same as Situation 2 but with one child           

As the estimated net chargeable income for 2023/24 is less than 90% of that of 2022/23 (that is, $206,000 < $239,400), you can apply for part of your provisional salaries tax for 2023/24 to be heldover.

For any taxpayer falling within Situation 2 and 3 above, the Assessor will allow holdover of part of the provisional salaries tax, provided that a written application for holding over is lodged within the prescribed time limit, and the reason for the salary reduction and the estimated income for the period from 1 April 2023 to 31 March 2024 are provided.

Please refer to Answer 8 below for the time limit on lodgment of application.

If your net chargeable income (net total income minus total allowances) for the year to 31 March 2024 will be less than 90% of your net chargeable income for the year to 31 March 2023, you can apply to pay less provisional tax.

Application should be lodged 28 days before due date or within 14 days after the issue of the demand for provisional tax. Application for holdover of provisional tax must be made in writing, lodged with this Department within the prescribed time limit. Where an application is lodged on the ground of fallen income for 2023/24, you should furnish a computation to demonstrate a drop of the net chargeable income by more than 10%, when compared with that for 2022/23.

As most taxpayers would have their 1st instalment of tax due in January 2024, the most appropriate time to lodge holdover will be in November and December 2023. By that time, you should know the actual income figures for the 7 months to 31 October 2023, and you should be in a better position to estimate your income for the remaining 5 months to 31 March 2024.

In summary, you should not furnish details of "no pay leave" for April and May 2023 in your 2022/23 tax return. To lodge an application for holdover now would be pre-mature.  You should, after receipt of your demand note for provisional tax, lodge an application within the prescribed time limit listed in Answer 8 when you are in a better position to make a projection for the full year´s income. 

If your estimated net chargeable income after deducting the contract gratuity for the year to 31 March 2024 will be less than 90% of your net chargeable income for the year to 31 March 2023, you can apply to pay less 2023/24 provisional salaries tax.

Your written application stating the ground for holdover should be lodged within the prescribed time limit listed in Answer 8.

If your estimated net chargeable income (net total income minus allowances) for the year to 31 March 2024 will be less than 90% of your net chargeable income for the year to 31 March 2023, you can apply for holdover of provisional tax.

The following example illustrates how the estimated net chargeable income for 2023/24 is computed.

Example - You are single and your employment income for the year to 31 March 2023 is $650,000.

As the estimated net chargeable income for 2023/24 is less than 90% of that of 2022/23 (that is, $458,000 < $466,020), you can apply for part of your provisional salaries tax for 2023/24 to be heldover. Your written application for holding over should be lodged within the prescribed time limit listed in Answer 8 by stating the ground for holdover. 

The number of years of deduction of home loan interest is extended from 15 years of assessment to 20 years of assessment with effect from the year of assessment 2017/18.  If your estimated net chargeable income (net total income minus allowances) for the year to 31 March 2024 will be less than 90% of your net chargeable income for the year to 31 March 2023, you can apply for holding over of provisional tax.

The following examples illustrate how the estimated net chargeable income for 2023/24 is computed.

Example 1 - You are single and your employment income for the year to 31 March 2023 is $650,000.

As the estimated net chargeable income for 2023/24 is more than 90% of that of 2022/23 (that is, $478,000 > $466,200 ), your provisional salaries tax for 2023/24 cannot be heldover.

Example 2 - You are married and your spouse has no income (you are entitled to Married Person´s Allowance). Your employment income for the year to 31 March 2023 is $650,000.

As the estimated net chargeable income for 2023/24 is less than 90% of that of 2022/23 (that is, $346,000 < $347,400), you can apply for holding over of part of your provisional salaries tax for 2023/24. Please refer to Answer 8 below for time limit on lodgment of application. 

The law provides for a two-tier time limit. You must lodge an application not later than 28 days before the due date for payment of the provisional tax or 14 days after the date of issue of the notice for payment of provisional tax, whichever is the later. Hence, in respect of all or a part of the 1st instalment of tax, you should lodge an application for holdover on or before 5 December 2023. Any holdover application in connection with the 2nd instalment of tax should be lodged on or before 5 March 2024.

The 28th day prior to due date of payment is 19 January 2024 and the 14th day after the date of issue of the demand note is 16 January 2024. Hence, insofar as the holdover of the 1st instalment of tax due on 16 February 2024 is concerned, your application should be lodged on or before 19 January 2024.