tax file number
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A tax file number (TFN) is a unique identifier issued by the
Australian Taxation Office The Australian Taxation Office (ATO) is an Australian statutory agency and the principal revenue collection body for the Australian Government. The ATO has responsibility for administering the Australian federal taxation system, superannuat ...
(ATO) to each taxpaying entity — an individual, company, superannuation fund, partnership, or trust. Not all individuals have a TFN, and a business has both a TFN and an
Australian Business Number The Australian Business Number (ABN) is a unique 11-digit identifier issued by the Australian Business Register (ABR) which is operated by the Australian Taxation Office (ATO). The ABN was introduced on 1 July 2000 by John Howard's Liberal Party ...
(ABN). If a business earns income as part of carrying on its business, it may quote its ABN instead of its TFN. The TFN was introduced initially to facilitate file tracking at the ATO, but has since been expanded to encompass income and other data matching. The TFN consists of a nine digit number, usually presented in the format ''nnn nnn nnn''. Strict laws require that TFNs may be recorded or used only for specifically authorised tax-related purposes. The TFN serves a purpose similar to the American
Social Security number In the United States, a Social Security number (SSN) is a nine-digit number issued to United States nationality law, U.S. citizens, Permanent residence (United States), permanent residents, and temporary (working) residents under section 205(c)(2 ...
, but its use is strictly limited by law to avoid the functionality creep which has affected the US counterpart. It also serves a similar function as national insurance in the UK.


History

TFNs have been used by the ATO since the 1930s. The TFN itself was either 8 or 9 digits, with a check digit. Individuals received a 9 digit TFN and non-individuals received an 8 digit TFN. The quote of the TFN was not obligatory when, for example, lodging a tax return, though failing to quote one may delay the processing of the tax return. In May 1988, following the demise of the Australia Card scheme, the Treasurer
Paul Keating Paul John Keating (born 18 January 1944) is an Australian former politician and unionist who served as the 24th prime minister of Australia from 1991 to 1996, holding office as the leader of the Australian Labor Party (ALP). He previously serv ...
announced that the
Government A government is the system or group of people governing an organized community, generally a state. In the case of its broad associative definition, government normally consists of legislature, executive, and judiciary. Government ...
intended to introduce an enhanced TFN scheme, and legislation establishing the scheme was passed that year. When it was introduced in 1988 the 8 and 9 digit TFN scheme still applied. However, as the 8 digit TFNs were becoming exhausted, all new taxpayers are issued 9 digit TFNs. The numbers now do not have any embedded meaning.


TFN and data matching

The primary purpose of the expanded TFN system is to allow the ATO to collect income and other information for taxpayers (officially known as "data matching"). This is done by the ATO requiring paying entities (e.g., banks, employers, public companies, superannuation funds,
Centrelink The Centrelink Master Program, or more commonly known as Centrelink, is a Services Australia master program of the Australian Government. It delivers a range of government payments and services for retirees, the Unemployment, unemployed, f ...
and others) to electronically provide the ATO with information of certain types of payments made by them, together with the associated TFN of the recipient. When taxpayers file their income tax returns at the end of the financial year, the ATO can electronically match the income reported by the taxpayer against the payments reported by the paying entities. The types of income payments covered by the TFN data matching rules include: * Wages and salaries from employers (see PAYG), including fringe benefit and superannuation information *
Interest In finance and economics, interest is payment from a debtor, borrower or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum (that is, the amount borrowed), at a particular rate. It is ...
from
bank A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital markets. Beca ...
s and similar institutions, from all account types, including term deposits *
Interest In finance and economics, interest is payment from a debtor, borrower or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum (that is, the amount borrowed), at a particular rate. It is ...
from bonds and debentures *
Dividend A dividend is a distribution of Profit (accounting), profits by a corporation to its shareholders. When a corporation earns a profit or surplus, it is able to pay a portion of the profit as a dividend to shareholders. Any amount not distributed ...
s from public companies * Distributions from
unit trust A unit trust is a form of Collective investment scheme, collective investment constituted under a Trust (law), trust deed. A unit trust pools investors' money into a single fund, which is managed by a fund manager. Unit trusts offer access to a ...
s, including cash management trusts * Superannuation payments (amounts paid out to a beneficiary) * Some government benefits, in particular unemployment benefits. Other information provided to the ATO using the TFN includes health insurance information, as well as the purchase and sale of property, such as real estate and shares. Because of the community backlash against the aborted Australia Card scheme, the expanded TFN rules are technically optional. The taxpayer entitled to such income payments has a choice between quoting the TFN, or not doing so. As a general rule taxpayers quote their TFN. Institutions usually help by reminding or inviting clients to do so on any new source of income (e.g., new accounts, new debentures, new shareholdings). Forms for quoting include a reminder of the key provisions of the system, for example from Computershare: : ''It is not an offence to withhold your TFN or, where the securities are held for a business purpose, your ABN. However, if you do not provide your TFN or ABN, tax may be deducted from payments of interest and the unfranked portion of dividends and distributions at the highest marginal rate.'' If an account is held in the names of multiple investors, each may choose whether to quote or not, but tax is withheld unless at least two have done so.


TFN withholding tax

In the few cases that a payee has not supplied the paying entity with his or her TFN by the time payment is to be made, unless if the payment is exempt, the paying entity is legally required to withhold a TFN withholding tax amount at the highest marginal tax rate (currently 47%) from the payment the paying entity is about to make. Similar but stricter rules apply to businesses which do not supply their customers with an ABN. The paying entity would report the TFN and ABN withheld amounts on its next Business Activity Statement (BAS) and add the withheld amounts to the payment it needs to make to the ATO. The paying entity would also advise the recipient of the TFN withheld amount. The TFN withheld amount becomes a prepayment of tax by the taxpayer whose funds have been withheld. When the taxpayer files an income tax return he or she would need to claim the so-called "TFN amounts" against his or her final tax liability, and any excess is refunded. The taxpayer needs to file an income tax return to get back the excess of tax.


Exemptions

Some people and organisations are exempt from TFN withholding; they may state their exemption category instead of quoting a TFN. This includes: * Income tax exempt organisations (e.g.,
school A school is an educational institution designed to provide learning spaces and learning environments for the teaching of students under the direction of teachers. Most countries have systems of formal education, which is sometimes compulsor ...
s,
museum A museum ( ; plural museums or, rarely, musea) is a building or institution that Preservation (library and archival science), cares for and displays a collection (artwork), collection of artifacts and other objects of artistic, culture, cultu ...
s). *
Non-profit organisation A nonprofit organization (NPO) or non-profit organisation, also known as a non-business entity, not-for-profit organization, or nonprofit institution, is a legal entity organized and operated for a collective, public or social benefit, in co ...
s. * Recipients of government pensions who are 80 years and older. *
Children A child (plural, : children) is a human being between the stages of childbirth, birth and puberty, or between the Development of the human body, developmental period of infancy and puberty. The legal definition of ''child'' generally refers ...
under 16 (earning up to $420 per year of interest, in 2005). * Foreign residents for
interest In finance and economics, interest is payment from a debtor, borrower or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum (that is, the amount borrowed), at a particular rate. It is ...
and
dividend A dividend is a distribution of Profit (accounting), profits by a corporation to its shareholders. When a corporation earns a profit or surplus, it is able to pay a portion of the profit as a dividend to shareholders. Any amount not distributed ...
s (they are subject to non-resident withholding tax instead). People and organisations in these categories may still need to submit a tax return, but generally speaking these exemptions mean those not needing to submit a tax return don't need to get a tax file number. The exemption for
children A child (plural, : children) is a human being between the stages of childbirth, birth and puberty, or between the Development of the human body, developmental period of infancy and puberty. The legal definition of ''child'' generally refers ...
does not apply to company dividends, and if a
bank account A bank account is a financial account maintained by a bank or other financial institution in which the financial transactions between the bank and a customer are recorded. Each financial institution sets the terms and conditions for each type of ...
is held in more than one name, it is only exempt if all account holders are under 16. Children can apply for a TFN and quote it in the same way as anyone else, if they wish. For some forms of income, small earnings are exempt from TFN withholding for any account holder. For example, bank interest up to $120 per year is exempt. (However such amounts are still taxable income.)


Issuing

TFNs are issued by the Australian Taxation Office. A new taxpayer receives a tax file number within about a month of making an application and providing
proof of identity An identity document (also called ID or colloquially as papers) is any documentation, document that may be used to prove a person's identity. If issued in a small, standard credit card size form, it is usually called an identity card (IC, ID c ...
.
Centrelink The Centrelink Master Program, or more commonly known as Centrelink, is a Services Australia master program of the Australian Government. It delivers a range of government payments and services for retirees, the Unemployment, unemployed, f ...
helps those applying for certain benefits to apply for a TFN at the same time, if they don't already have one. For example, unemployment benefits are subject to the TFN withholding rules if a TFN is not quoted. A young person applying for such a benefit for the first time may have never previously needed a TFN. Foreigners in Australia whose visas permit them to work can apply for a TFN online, using their passport number and visa number. Proof of identity is established by the ATO confirming those numbers with the Department of Immigration.


Check digit

As is the case with many identification numbers, the TFN includes a
check digit A check digit is a form of redundancy check used for Error detection and correction, error detection on identification numbers, such as bank account numbers, which are used in an application where they will at least sometimes be input manually. It ...
for detecting erroneous numbers. The algorithm is based on simple modulo 11 arithmetic per many other digit checksum schemes.


Example

The validity of the example TFN '123456782' can be checked by the following process The sum of the numbers is 253 (1 + 8 + 9 + 28 + 25 + 48 + 42 + 72 + 20 = 253). 253 is a multiple of 11 (11 × 23 = 253). Therefore, the number is valid.


See also

* Taxation in Australia * National Insurance number (a similar number in the
United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the European mainland, continental mainland. It comprises England, Scotlan ...
) * Social Insurance Number (a similar number in
Canada Canada is a country in North America. Its Provinces and territories of Canada, ten provinces and three territories extend from the Atlantic Ocean to the Pacific Ocean and northward into the Arctic Ocean, covering over , making it the world ...
) *
Social security number In the United States, a Social Security number (SSN) is a nine-digit number issued to United States nationality law, U.S. citizens, Permanent residence (United States), permanent residents, and temporary (working) residents under section 205(c)(2 ...
(a similar number in the
United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country Continental United States, primarily located in North America. It consists of 50 U.S. state, states, a Washington, D.C., ...
) * PPS number (a similar number in the
Republic of Ireland Ireland ( ga, Éire ), also known as the Republic of Ireland (), is a country in north-western Europe consisting of 26 of the 32 Counties of Ireland, counties of the island of Ireland. The capital and largest city is Dublin, on the eastern ...
) * IRD number (a similar number in
New Zealand New Zealand ( mi, Aotearoa ) is an island country in the southwestern Pacific Ocean. It consists of two main landmasses—the North Island () and the South Island ()—and over 700 List of islands of New Zealand, smaller islands. It is the ...
)
How to do TFN Field Validation in programs


References

{{National identification numbers Taxpayer identification numbers Taxation in Australia Identity documents of Australia