How to correctly set up PAYG tax witholding

alyce alexandra

I have just found out that we have been withholding too much tax from employees. The amount withheld by Reckon is larger than the amount it says to withhold on the ATO website. I have looked at previous threads and followed there instructions but it is still too much. I have the correct tax info (01/07/13), all the people who have help debts are ticked approprately and the pay frequency is correct. How can I change it to mirror the ATO withholding amount?

Graham Boast

Hi Alyce

This is almost certainly an issue with how the employee's superannuation item is set up.  If I enter $2185 (Gross PLUS Super) with Help debt into the ATO calculator, the calculated tax is $506 - the same amount Reckon is calculating.  This means that you are incorrectly taxing the super contribution.

Look at this post and follow the instructions re setup of the Super item in Lists > Payroll Item List.  If there are more than one Payroll Item Type = Super, check them all.

https://community.reckon.com.au/reckon/topics/payg_withholding_error


If you still can't get it to work, drop me an email and I can set up a remote support session

Graham Boast
Reckon Accredited Consultant
[email protected]

Mirko

Hey Alyce,

Welcome to the Reckon Community and thank you for your post.

Thanks for providing a screen shot and an outline to what you have done (very helpful!), so we know where you are at.

The next step is to have to look at the components that make up the pay, and check that any component that shouldnt be attracting tax, in fact is incurring tax (it's common that Super contributions are incorrectly selected to incur tax when they shouldn't).

If you cannot see the discrepancy yourself, you may need to contact technical support for 1-to-1 attention.

Thanks,
Mirko

alyce alexandra

Thanks very much for your help Mirko and Graham. After going through the payroll items I found that the PAYG tax was calculated including the super amounts. I have deselected that and it is now showing correct tax amounts.

Very much appreciated.

John G

Good to hear your payroll process is where is should be, Alyce,

cheers,
John

m_ca

Hi, I am having this issue with the latest Reckon Payroll app. The Withholding Tax calculation is much higher than what the ATO calculator tool https://www.ato.gov.au/Calculators-and-tools/Tax-withheld-calculator/ says it should be. Appreciate this is an old thread, the solution link above posted by Graham Boost no longer exists and there is no option in the current app to update the superannuation list item as suggested.

I do not have a Premium subscription for the software and am using a custom Earning Item called "SAW", which is the Income Type I understand the ATO requires us to report for normal wages in STP phase 2 (is everyone else dong that too? Let me know if I misunderstood!). The earning item is set up as a "Normal earning item" with an hourly rate - fixed salary type is not available. I have "Tax applicable" and "Include in super guarantee calculation" both ticked. There are no other options available in the item setup.

The employee is setup as a full-time employee with a 38 hour week, so when creating the payrun I convert weekly salary to an hourly pay-rate (weekly salary / 38 hours) and then enter 38 hours and the hourly rate in the pay item for a 5 day working week.

The weekly salary calculates correctly using the hours and pay-rate, the Super amount calculates correctly using 10.5%, it's just the withholding tax amount that is wrong. I know I can override it and manually enter the amount, but it would be good if I could exclude having to perform this step.

Can someone please advise why the tax amount calculates could be wrong and how to fix it? if you need any more specific info on my payrun e.g. the exact amounts and amounts calculated by the app, please send me a private message. Many thanks.

Acctd4

Hi @m_cantafio

You've posted your question in the Reckon Accounts (Desktop) category which is very different to the Reckon Payroll App.

Have a look under the Reckon Payroll App category (in case someone has asked the same question):

https://community.reckon.com/categories/payrollapp

or otherwise try posting your question there & you should be able to find a relevant solution ☺️

m_ca

Ok, thanks, I will do.