New employees give you their tax details — TFN, residency for tax purposes, and their tax-free threshold choice — so you can withhold PAYG correctly from day one.
The traditional paper TFN declaration (NAT 3092) has largely been replaced by the ATO online commencement forms and reporting through STP Phase 2. You generally no longer send the ATO a separate declaration.
The catch: if an employee doesn't give you a valid TFN — and has no valid exemption — within 28 days of starting, you must withhold at the top rate: 47% (including the Medicare levy) for residents.
How employees provide their tax details
Before their first pay, a new employee needs to tell you the details you use to work out how much tax to withhold. There are two ways they can do that, and one has quietly become the default.
The modern route is the ATO online commencement forms. A new employee signs in to myGov, links to the ATO, and completes the "New employment" forms — the online equivalent of the TFN declaration and the withholding declaration. They can send you a summary, and you enter the details into payroll. The older paper TFN declaration (NAT 3092) still exists as a fallback where online isn't practical.
Either way, the same core information is captured:
- The employee's tax file number (or a reason they're not quoting one)
- Their residency for tax purposes — Australian resident, foreign resident or working holiday maker
- Whether they are claiming the tax-free threshold from you
- Any study and training support loan (STSL) — for example a HELP debt — that affects withholding
Collect these details before the first pay run, not after. If you run a pay without them, you either guess (and risk under-withholding) or default to the top rate — both of which annoy a new starter. The online forms let the employee do it in minutes before day one.
No TFN provided
An employee has 28 days from starting to give you a valid TFN. If they haven't — and they don't have a valid reason not to quote one — you must withhold tax at the top marginal rate:
- 47% for Australian residents (that's the top rate including the 2% Medicare levy), and
- 45% for foreign residents (no Medicare levy).
Those top rates are current as at 9 July 2026. There are valid exemptions — situations where an employee can genuinely not quote a TFN and you don't apply the top rate. These include an employee who:
- Is under 18 and earning below the relevant threshold
- Is a recipient of a pension, benefit or allowance from Services Australia or the Department of Veterans' Affairs
- Has applied for a TFN and is within the 28-day pending period (they quote "applied for", and you use their real TFN once it arrives)
The 28-day clock is for the employee to provide a valid TFN, not to apply for one indefinitely. If the pending TFN doesn't come through inside the window and no other exemption applies, switch that employee to top-rate withholding until you have a valid number.
The tax-free threshold
The tax-free threshold is the amount an employee can earn each year before income tax applies. When they claim it from you, you withhold less from each pay.
The key rule for employers: an employee should generally claim the tax-free threshold from only one employer at a time — usually the one that pays them the most. If someone claims it from two jobs at once, not enough tax is withheld across the year and they typically end up with a bill at tax time. This is their choice to make on the commencement form; your job is to withhold according to what they've declared.
If a new starter has another job and claims the threshold with you as well, that's their call — but it's worth a heads-up that claiming it from the higher-paying role usually leaves them better off at year end. You simply apply whatever they've declared.
STP Phase 2
Under Single Touch Payroll (STP) Phase 2, the TFN declaration details a new employee gives you are reported to the ATO through STP — as part of your normal pay reporting. Because those details flow to the ATO with the pay event, you generally no longer send the ATO a separate TFN declaration.
What that means day to day:
- The employee completes the online commencement forms (or a paper declaration) and gives the details to you.
- You enter the TFN, residency, threshold and STSL details into payroll.
- STP Phase 2 reports those details to the ATO with your pay run — no separate lodgement.
You still keep the employee's declaration (or the online-form summary) on file as part of your records, even though you're not mailing it in.
Handling TFNs
A tax file number is protected information. You may collect and use an employee's TFN only for authorised purposes — payroll, tax and super — and you must keep it secure.
- Store it securely, with access limited to people who need it for payroll or tax.
- Use it only for the purposes it was provided — don't repurpose it as a general employee identifier.
- Don't over-retain. Keep TFN records only as long as required, then dispose of them securely.
Never email a TFN in plain text, list it on a shared spreadsheet, or print it on documents that don't need it (like a payslip). TFN privacy rules carry real penalties — treat it like the sensitive credential it is.
Quick answers
What if an employee doesn't provide a TFN?
If they don't give you a valid TFN — and have no valid exemption — within 28 days of starting, you must withhold at the top rate: 47% (including the Medicare levy) for residents, or 45% for foreign residents. Valid reasons not to quote a TFN include being under 18 and below the threshold, being a pensioner, or having applied for a TFN and being within the pending period.
Do I still fill in the paper TFN declaration?
Mostly no. The paper TFN declaration (NAT 3092) has largely been replaced by the ATO online commencement forms through myGov, plus reporting through STP Phase 2 — so you generally no longer send a separate declaration. The paper form still exists as a fallback.
Can an employee claim the tax-free threshold from two jobs?
Generally no. An employee should claim the tax-free threshold from only one employer at a time — usually the highest-paying one. Claiming it from two jobs at once usually leads to too little tax being withheld and a bill at year end.
Collects and validates tax details — and withholds correctly, automatically
Ledra Pay collects each new employee's TFN and tax details, validates them, and applies the right PAYG withholding automatically — including the top rate where no valid TFN arrives inside 28 days — while reporting the declaration through STP Phase 2 for you.
See Australian payroll →Government sources
- Australian Taxation Office — Tax file number declaration (the declaration and NAT 3092).
- ATO — Taking on new employees (online commencement forms / TFN declaration).
- ATO — Withholding if no TFN is provided (top-rate withholding and exemptions).
- ATO — Claiming the tax-free threshold (one employer at a time).
- ATO — Single Touch Payroll Phase 2 (reporting TFN declaration details through STP).