Introduction

Use Taxation override transactions to adjust tax only when the adjustment applies to all transactions in the pay.

There are two types of Taxation override transactions

1. Whole Pay tax overrides
2. Allowance tax overrides

Whole Pay tax overrides, are designed to supersede the PAYE calculation of the entire pay. This is done by adding a T. Tax Override type allowance to the pay.

Allowance tax overrides, are where an individual transaction requires unique tax treatment to the employee's normal income in the pay. This requires the allowance record to have its Tax override field set to Yes and usually the Tax Override type and Tax Override rates set. But depending on the use case these may need to be set at Transaction entry time instead.

This topic covers how the "Whole Pay" tax override works for NZ only.

Fields

Extra pay:

• No

  Default value. Disables the Extra Pay Details fields.

• Yes

  Enables the Extra Pay Details fields and flags this transaction as an extra pay transaction for IRD reporting.

Override amount:

The value that you enter in this field depends on the Override type value.

Override type:

The Override type will default to the value of the setting held in the Allowance record's Tax override type field for some transactions. Not all Allowance records have a matching Transaction Tax Override type.

• %

  % is the default value for Allowance record's where the Tax override type is W. Scheduler Payments.

  Used for employees who must pay a specific percentage of tax.

• Fixed

  Used to specify the exact amount of tax the employee pays.

  Typical use cases are: Reversing a pay or not agreeing with PayGlobal's calculations.

• Period

  The only valid scenario where this option is allowed in NZ is for cases where Holiday Pay is paid in advance in advance as a lump sum and it's been agreed to use IRD's alternative method to Extra Pay.

  The "Period" method requires you to enter the number of pay periods the lump sum amount relates to, e.g. a weekly paid employee receiving 3 weeks Annual leave in one pay. You'd enter "3".

• +

  Taxes the employee normally and then adds the Override amount value.

• -

  Taxes the employee normally and then subtracts the Override amount value.

• Xtra Pay Calc

  Xtra Pay Calc is the default value for Allowance record's where the Tax override type is E. Extra Pay or R.Redundancy/Retirement.

  From 1 April 2025 this option can only be used for "current employees". If the system detects the pay is for termination or post termination pay it will automatically change the Override type to Xtra Pay Calc on Term. This is to help the system identify that it needs to calculate the employee's annualised PAYE income on the value of all payments made in the four weeks prior to, and inclusive of the day on which the extra pay is paid.

  Also see Extra Pay Details fields

• Xtra Pay Calc on Term

  From 1 April 2025, if the system detects the pay is for a termination or post termination, i.e. the pay contains a Termination Allowance and the pay contains any Extra Pay allowances, it will automatically update the Tax override type setting from Xtra Pay Calc to Xtra Pay Calc on Term. This is to help the system identify that it needs to calculate the employee's annualised PAYE income on the value of their last two paid pay periods before the pay period of this pay.

  Note: This is a system only option. You cannot change transactions that have this setting and you cannot select this option from the field's picklist. If you disagree that a lump sum amount within a termination pay or post termination pay needs to be taxed as described above. You will need to enter a whole pay Taxation Override (T. Tax Override type allowance) into the pay.

  Also see Extra Pay Details fields.

• 1 +%

  Adds a percentage of the gross (defined in the Override amount field) to the tax deducted.

• 2 -%

  Subtracts a percentage of the gross (defined in the Override amount field) from the tax deducted.

• ESCT

  ESCT is the default value for Allowance record's where the Tax override type is S. ESCT.

  You can select this option for Z-type allowances that have Tax override = "Yes"

• G: Tax Credit for Donations

  If you reverse a Payroll Giving donation in which the original tax credits were greater than the PAYE, then you need to check the tax credit amounts and manually edit them, if required. In this situation, you would have to manually correct the tax credit amounts for the deductions using a Taxation override transaction with Override type = "G: Tax Credit for Donations".

• B. Regular Bonus

  is the default value for Allowance record's where the Tax override type is B. Regular Bonus.

  Applies to bonus payments you pay where the frequency at which you pay your employees their bonuses is less than the frequency they receive their normal pay, e.g. a weekly/fortnightly employee that receives monthly bonuses. A monthly employee that receives quarterly/six-monthly bonuses.

  Bonuses paid regularly are taxed by adding the bonus amount to the employee's gross wages for the pay periods in which they were earned. You define the number of pay period the regular bonus relates to in the Override amount field

Multiply Fixed Transactions:

Enabled when Override Type = "Period".

• Yes

  Select "Yes" if the employee has fixed-type allowances or deductions that usually occur every pay period. PayGlobal will multiply these transactions by the Override amount.

  When you add a Taxation Override transaction and set Multiple Fixed Transactions to "Yes", pay processing applies the Override amount to all fixed value allowances and deductions, including those created by payroll rules.

  Note: You must follow best practice ranking recommendations when you set up payroll rules.
  - Superannuation allowance payroll rules: Rank = Z or ZE
  - Other allowance payroll rules: Rank = A or G.
  - Deductions payroll rules: Rank = P or S.

• No

  Select "No" if the employee has fixed-type allowances or deductions that you do not want to use every pay period, such as meal allowances.

Override type and Override amount

The following table explains the relationship between the Override type and Override amount values.

Extra Pay Details

It is only recommended to apply a whole pay 'extra pay' tax override for current employees where the only transactions in the pay are extra pay because it will impact the tax treatment of all other payment as well.

Also see Extra Pay (NZ)

Redundancy or retirement:

Enabled when Extra pay = "Yes". Redundancy or retirement payments are not liable for the ACC Earner Levy. This Yes/No field determines whether tax on this extra pay includes the ACC Earner Levy.

If you set Redundancy or retirement to "Yes", then the following Confirm message appears:

"Setting this field to Yes will affect all transactions in the pay and set them to 'Earnings not liable for earners' levy'
Is this correct?"

• If you click "Yes" then PayGlobal keeps Redundancy or retirement = "Yes".
• If you click "No" then PayGlobal changes Redundancy or retirement to "No".

  Note: We recommend that you set any specific types of taxation override at allowance level. You should use Taxation override transactions to adjust tax only when the adjustment applies to all transactions in the pay.

Elects to tax at higher rate:

Enabled when Extra pay = "Yes" and Override type = "Xtra Pay Calc". Extra pay has tax rates based on income ranges. If the employee's total income plus their extra payment does not place them in the income range for the higher tax rate, then they can still opt to have the lump sum taxed at the higher tax rate. An employee could decide to use this option if some of their income was not taxed, such as rents.

Calculate grossed up amount:

Enabled when Extra pay = "Yes" and Override type = "Xtra Pay Calc".

• Yes (default) = PayGlobal automatically calculates the Grossed up annual amount when you process the pay.
• No = You need to enter the Grossed up annual amount

It is recommended to set this field to "No" when:

• PayGlobal does not have the necessary 4 weeks (for current employees) or 2 pay periods (for terminating/terminated) employees in the database.
• You want to override the amount PayGlobal calculated.

Grossed up annual amount:

Enabled when Extra pay = "Yes" and Override type = "Xtra Pay Calc"

• If Calculate grossed up amount =Yes, after processing the pay the system calculated value is only visible if you access an open pay transaction using CTRL+D.
• If Calculate grossed up amount = No, you must enter the Grossed up annual amount (aka Annualised amount), otherwise no tax is calculated. Do not include the value of the Extra Pay or in the case of employees on secondary tax code the related low rate threshold. PayGlobal will do this for you on processing the pay.

The details of the calculation when Calculate grossed up amount = Yes only are recorded in the Process Pay Audit Log.

Tax codes with Lower rate flagged:

When you process the pay, PayGlobal sets this field to "1" if the employee is taxed at the lowest extra pay rate; otherwise it sets this field to "0".

Note: This setting is used in the Employer Monthly Schedule (IR348).

Earner Levy:

When you process the pay, PayGlobal splits out the earner levy component of the PAYE and displays the value in this read-only field.

Student Loan:

When you process the pay, the Student Loan repayment for this transaction is displayed in this read-only field.

Note: To see PAYE, Earner Levy, and Student Loan values on a transaction with Source = "Transaction Added/Changed", you need to use the Ctrl+D shortcut key to open it, rather than double-clicking it.