In Australia, payroll payments for back payments, commissions, bonuses and similar payments are subject to a withholding limit of 47% on tax withheld using an annualised method.
The ATO provides two methods, A and B, to work out the amount of tax you need to withhold from the additional payment.
Attaché Payroll has been designed to use Method A for back pays, (including Lump Sum E payments), commissions, bonuses and similar payments.
Refer to the ATO Site: https://www.ato.gov.au/rates/schedule-5---tax-table-for-back-payments,-commissions,-bonuses-and-similar-payments/ for more information.
Configuring Back Payments, Commissions, Bonuses and similar payments
Back payments, commissions, bonuses and similar payments are configured as Allowances and need to have the Back Pay, Bonus, Comm. checkbox selected for the correct withholding tax to be calculated.
To configure a back payment, commission, bonus and similar payments:
Choose Setups, Payroll, Allowances, Maintain.
Enter the Allowance Code (i.e. Backpay, Bonus, Comm) as required.
Enter a Description.
Select a Type from the drop-down menu.
Set Tax Status to Before Tax.
Tick the Include in OTE checkbox if Super is to be calculated on the Allowance amount.
Set Tax Certificate Code.
Back Pay = Include in Tax Certificate totals (back payments that accrued or were payable less than 12 months before the date of payment.
Back Pay Lump Sum E = Lump Sum Payment E (accrued, or was payable, more than 12 months before the date of payment and is greater than or equal to the Lump sum E threshold amount ($1,200).
Bonus = Bonus / commission.
Commission = Bonus / commission.
Similar Payments = Include in Tax Certificate totals.
Select Back Pay, Bonus, Comm. checkbox (ticking this box calculates the taxable amount by spreading the payment across the number of pay periods in the current tax year based on the number of pays per year).
Note: DO NOT tick this check box if this is a regular allowance that the employee receives every pay, if the allowance payment forms part of the employee's normal pay, or if part or all of the payment is to be salary sacrificed.
Select Accept F9.
Processing Back Payments, Commissions, Bonuses and similar payments
Note: If a back payment is for a prior financial year, it should be paid to the employee in the current financial year.
To process a back payment:Choose Payroll, Workflows, Create Modify Time Sheets
Select the employee
If an Auto Pay employee select Yes when prompted.
Select Accept F9.
Enter/Confirm all details of current pay.
Insert a new line
New Line Type Allowances
Code - select your back pay, back pay Lump Sum E, commission, bonus or similar payments.
Enter the required details for the payment.
Select Accept (F9).
The amount of tax needed to be withheld will be calculated using Method A.
Process the pay.