There appears to be some confusion regarding the information put out about the taxation treatment of the P.C.A. Allowance.
The Inland Revenue Dept. rules on the taxation of such lump sum payments are quite clear and explicit.
A calculation is made as follows:
Earnings over the 4 weeks preceding the payment are averaged to provide an average weekly rate.
This is multiplied by 52 to get a nominal annual rate.
The amount of the lump sum is added to this nominal annual rate.
If that final figure is between $38,001 and $60,000, the taxation rate is 34.3%
If the final figure is over $60,000, the taxation rate is 40.3%
The taxation rates are 1.3% above the nominal tax rates of 33% and 39% because of the addition of the A.C.C.Earners Levy.
Two examples demonstrate the workings of this calculation:
1. | S.F.F Weekly Pay | $940.00 |
Plus 2 O/T at approx. | $300.00 | |
4 Weeks Earnings | $4360.00 | |
Nominal Annual Earnings | $56680.00 | |
Plus PCA Payment | $1354.00 | |
Total: | $58034.00 |
Therefore the payment is taxed at 34.3%
2. | S.F.F Weekly Pay | $940.00 |
Plus 3 O/T at approx. | $300.00 | |
4 weeks Earnings | $4660.00 | |
Nominal Annual Earnings | $60580.00 | |
Plus PCA Payment | $1354.00 | |
Total: | $61934.00 |
Therefore the payment is taxed at 40.3%
If using this calculation, the figure is over $60,000 and therefore the P.C.A. payment is taxed at 40.3%, but in the end you do not earn over $60,000 in the year,any person can put in a Tax Return to claim the refund.