Summary

You can set up specific types of taxation override at allowance level to ensure that employees are taxed at the correct rate for that type of transaction.

Important: Taxation override allowances apply the adjustment only to the allowance transaction, not to all transactions in the pay.

Allowance settings

When you set up an allowance with a taxation override, you can specify the type of override, which determines how the tax is calculated. It also determines which fields are enabled on the Tax overrides tab of the allowance form in Transaction View.

Allowances | Details (i) tab:

• Tax override = "Yes"
• Tax override type varies by country:

Australia

• [Blank]

  This setting is typically used for "whole pay" tax override allowances, i.e. Allowances with Type "T.Tax Override". Using this option gives you access to apply a % or Fixed tax rate to the individual allowance transaction in addition to all other tax treatment types described in this topic. When you insert an allowance into Transaction View with this setting, then you will need to manually set the tax Override type in Transaction View. If you don't it will default to %.

• Bonus

  This setting enables you to tax the individual allowance as per the ATO's Schedule 5 - Tax table for Back Payments, Commissions, bonuses and similar payments. PayGlobal applies Method A.

• Lump sum in arrears

  Since the introduction of STP Phase 2, it has been necessary for employers to specify the year(s) the Lump Sum E relates to so that employees are not over taxed. Because, you usually pay more tax in the year you receive the lump sum than you would if tax was withheld in the year you earned it. This setting helps you to fulfil your employees ability to claim an offset for lump sum payments they receive in arrears (LSPIA).

• CDEP

  Community Development Employment Projects (CDEP) payments are required to be flagged via a tax override due to their ATO reporting requirements and ability to attract a tax offset for some individuals. CDEP was depreciated by the ATO in the 2015/16 financial year, but has remained in PayGlobal since for record keeping and historical payment summary amendment purposes.

• Return to work

  This setting enables you to tax the individual allowance as per the ATO's Schedule 4 - Return to work payments.

  Note: This type of allowance is exempt from Medicare Levy Surcharge calculations.

   

  New Zealand

  • [Blank]
  • W. Schedular Payments
  • E. Extra Pay
  • R. Redundancy or Retirement
  • S. ESCT.
  • B. Regular Bonus

  Fiji

  • [Blank]
  • Bonus
  • Withholding tax
  • Extra Ordinary Payment
  • Redundancy or Retirement.

Allowance form | Tax overrides tab

The values that you set up on the Allowances | Details (i) tab determines which fields are enabled on the Tax overrides tab of the allowance form in Transaction View.

New Zealand

• If Tax override type = "Extra pay", then Extra pay = "Yes", the field is disabled, and Extra Pay Details fields are enabled.
• If Tax override type any other value, then Extra pay = "No", the field is disabled, and Extra Pay Details fields are disabled.

For more information, see Transaction Entry - Taxation Overrides (NZ).

Australia

• Extra Emolument:

  This field is not used in Australia and will always appear disabled.

• Override amount:

  The value entered is dictated by the override type.

  If the Override type is "Fixed", enter a monetary value.

  If the Override type is "%", enter a percentage value, e.g. 20.00 for 20%.

  If the Override type is "Bonus", enter the number of pay periods the bonus needs to be taxed over.

• Override type:

  The value displayed will usually be derived from the setting applied to the source allowance record. But this can be changed by payroll rules or manual entry. The options available are:

  <blank>

  %

  Fixed

  Bonus

  Lump Sum in Arrears

  H. Return to Work

• Lump sum E:

  If Tax override type = "Lump sum in arrears", PayGlobal will automatically calculate the value Lump Sum E.

• Lump E Derived Tax Year

  If Tax override type = "Lump sum in arrears", then the Lump E Derived Tax Year field is enabled. This field allows you to enter a Tax Year in the past (in relation to the current Tax Year) to associate your Lump Sum E payment. It will always default to the most recent previous tax year.
  
  This field can never be set to the current or any future tax year.

• PAYE Amount:

  Despite the label, this field shows the "Total tax" calculated for this allowance transaction. It is inclusive of PAYG, STSL and MLS. The amount here will match value shown in the "Total Tax" column of the Employee Drilldown grid in Transaction View.

• HELP / SFSS :

  Despite the label, this field shows the full student trading and support loan deduction (STSL) component of the total tax being deducted from this allowance transaction.

Fiji

See Transaction Entry - Taxation Overrides (Fiji)

Processing Bonuses and Lump Sum in Arrears "Allowances" (AU)

These types of payments are subject to marginal tax calculation.

In scenarios where an employee has a student loan (STSL) and or medicare levy surcharge (MLS) payment obligations AND the tax calculated for the pay exceeds the marginal tax cap, then MLS will be reduced first, followed by STSL and lastly (if necessary) PAYG.

Processing Fixed and % overrides (AU)

When you process a pay containing an allowance configured to have a tax override type of either ‘Fixed’ or ‘%’, then you will not see the MLS amount included on the transaction itself, i.e. the amount is not included in the "Tax Total" field shown in Transaction View.

However, MLS is still calculated on the income amount of these transactions and amount to be deducted is included in the MLS system deduction.