What are tax file numbers?

Do I have to have a TFN? |  When do I use my TFN? |  Are you from overseas?

In the United States it is called a Social Security Number, in Britain a National Insurance Number, and in Australia, we call it a Tax File Number (TFN). Everyone who pays tax gets a TFN. Tax file numbers are obtained from the Tax Office when individuals commence their working life and are used to help identify your tax records.

Your TFN is identifiably yours and yours alone, and you shouldn't share it with friends, or online. Sharing the details of your tax file number could result in identity theft.

Every single tax file number issued is different. You need yours for every interaction you have with the Tax Office, it is unique for each person, and is generated using what is called a 'check digit algorithm' to make sure each number is able to be validated as authentic.

But as impressive as that may sound, what will stay front of mind in the longer term is knowing that, for most Australians, if you don't have a TFN you will pay more tax than you need to!

Once your TFN is issued, it is yours for life:

• even if you change names or jobs
• even if you move overseas or interstate, and
• even if you leave Australia and return at a later date - you still use the same tax file number.

Do I have to have a tax file number?
No, it is not compulsory to have a TFN, but life is pretty difficult without one. An employer that does not have your tax file number is legally required to hold back tax from your pay at the top marginal rate (45 cents for every dollar, plus Medicare levy of 1.5%), even if you are earning so little that you'd almost be paying no tax at all otherwise. And any interest from bank accounts, unfranked dividends from companies or dividends (franked or unfranked) passed to you through unit trust distributions, will have the highest possible level of tax taken out, if a TFN isn't provided.

You also need a TFN to be able to access government benefits or support, such as unemployment benefits, that you are entitled to. Tertiary students will need one to access the government's higher education loans (more on these here).

And having the requirement to provide a TFN fits in neatly with the Tax Office's compliance measure of cross checking information across different institutions (known as data matching), which allows it to check that you have earned what you said you earned.

As well as ordinary people, companies, superannuation funds, partnerships and trusts – in fact anyone or anything that pays tax or lodges a tax return – have to have a TFN. There are exceptions, such as schools and museums that are income tax exempt, non-profit organisations and people on most government pensions.

What do I do with my TFN? When do I use it?
You will be asked to provide, or declare, your tax file number in certain situations, such as starting work for the first time, or changing jobs, or applying for allowances and benefits from Centrelink. Of course, you'll also have to provide it to lodge a tax return or deal with the Tax Office.

The people or organisations most likely to ask for your details are:

• employers
• the Tax Office
• your bank or other financial institution
• Centrelink
• your university, and
• your superannuation fund.

When you start a new job, you provide your TFN by filling in a form from your employer – or alternatively you can obtain the declaration form here. You have 28 days to give them your tax file number before tax begins to be deducted at the highest rate of 45%, plus the Medicare levy of 1.5%.

Once you've filled out the form, your employer will use the information you have provided (regarding any dependants or higher education loan schemes) to determine how much tax is taken out of your salary or wage payments.

To ensure your TFN is used appropriately, you have the right to:

• ask what legal basis the organisation has in asking for the tax file number
• be told that if you don't provide it, you're not doing anything wrong, and
• be told what the consequences of not providing the tax file number will be.

Are you from overseas?
Permanent migrants or temporary visitors to Australia can apply for a TFN online at any time after entering Australia. This option is available if you are:

• a working holiday-maker
• a New Zealander and you are automatically granted a visa on arrival
• an overseas student and your visa has been amended to allow you to work
• a person with a valid visa allowing you to stay in Australia indefinitely
• a person with a business visa.

To apply, go to www.iar.ato.gov.au to fill in the online interactive registration form.

Non-residents of Australia for tax purposes can apply for a TFN using the Tax file number - application or enquiry for individuals living outside Australia form (here's the link). The tests used to determine your residency status for tax purposes are not the same as those used by other Australian agencies for other purposes such as immigration (find out more here).

Each year in Australia, millions of dollars in unclaimed super is left behind by temporary residents who don't realise they are able to claim their contributions when they leave. Temporary residents who permanently leave Australia are entitled to receive their super benefits, and this is known as a Departing Australia Superannuation Payment – or DASP. Find out more about DASP here.

Last reviewed 26/07/2012

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