A taxpayer’s Tax File Numbers (TFN) is a unique identifier which allows the Australian Tax Office to efficiently manage a taxpayer’s file. Whilst it is not compulsory to have a TFN, refusal to obtain one will result in the taxpayer being taxed at the highest marginal rate for all employment and being ineligible to make superannuation contributions.
The power for the Commissioner of Taxation to issue Tax File Numbers is derived from Division 2 of the Income Tax Assessment Act 1936. Once a personal applies for a TFN through the Australian Taxation Office, one will generally be issued within 28 days of the application being received, provided the applicant’s identity can be confirmed. Once a Tax File Number has been issued it will generally remain with the taxpayer’s file indefinitely unless it becomes compromised and the Commissioner or Taxpayer requests that a new one be issued.
New employees will be asked to fill out a TFN Declaration Form when they commence employment, and if the form is not filled out within 28 days of commencing work, the employer will be required to withhold 46.5% of your wages from each pay packet. For the first 28 days the employer must withhold tax as if you have provided a Tax File Number, as new arrivals will often need this grace period in order to obtain one.
With a few exceptions, which includes Australian Taxation Office Workers; employers; financial institutions; and tax agents, it is generally an offence for people to request your tax file number and to store it. The reason for this is that the Australian Tax Office do not want private companies using your TFN as a unique identifier to manage their own systems. Your Tax File Number is a private number and should not be given to anyone unless it is absolutely necessary. It is certainly never an offence to refuse to provide your Tax File Number.
Obtaining a Tax File Number is a simple process which involves confirming your identity with the Australian Taxation Office and then waiting for a notice of your TFN to be sent to your postal address. You can obtain the necessary forms online or your can visit a tax agent to complete the application on your behalf. If you don’t manage to obtain your Tax File Number within 28 days of commencing employment you will still be entitled to claim back any additional tax that you have had withheld, but you will have to wait until the new financial year when you lodge a tax return.