Setting up Salary Sacrifice

I need to set up a weekly salary sacrifice for an employee paid on an hourly rate with the following rules/employment agreement.
- Paid per hour
- Contributing $100 per pay period
- PAYG calculated on the adjusted gross
- SGC is calculated on the Gross (pre salary sacrifice amount)
Example:
Gross   1,100
SSac           100
Adj Gross 1,000
PAYG W      183 (Based on $1,000)
SGC            104.50 (Based on $1,100)

The only way I seem to be able to get the correct payroll and Payment Summary figures is to set up a payroll item for the hourly rate, a payroll item for $100 salary sacrifice, then set up the salary sacrifice super payroll item under the employee record for super details.

Is this correct or is there another straight forward method?

Comments

Terry_6882040

Hi Sonia
Not sure which product you are using?.

But the hourly rate item is correct
Then you need to set up a super item, for the salary sacrifice - this is where the PAYG will be adjusted and show correct figures on Payment Summary

Terry_6882040

This is the screens to set up

So Lists > Payroll Item List
Payroll Item > New
Super Contribution Type
Give it a name
Change from Super Guarantee to Salary Sacrifice (SS) (this will add to payment summary in RESC box)
Liability Account - Superannuation Payable or whatever you have set up
Tax tracking type - Gross Payments
Tick PAYG Tax - this will reduce the PAYG payable
Not based on Quantity
No default rate, or limit
It doesn't matter what other payroll items to include if it is a $ value, that only matter is its a %

once set up
Add to employee record and set up $ amount in there

Roger_10125991

For me, it is calculating the SGC at $95.00 (based on $1,000).
How can I fix this?

Mike Elliott

I'm having a similar problem to this issue, however I'm not a regular or competent user of Reckon Accounts Plus 2019 nor accounting practices.

I'm told that PAYG is calculated on the Gross amount, SGC is calculated on the Gross amount as well, a percentage amount is calculated on Gross Amount for a Salary Sacrifice to Super.

If I can maybe explain with a example,

Gross amount = $5000
PAYG on $5000 = $1023
10% S/S on $5000 = $500
9.5% SGC on $5000 = $475

Take Home Pay = $3477.00

Question 1, - This process differs from the original question in that the tax is calculated on the Gross amount rather than the Net Amount (Gross - SSac) - is this correct? Should the Tax be applied to the Net Amount?

Question 2, - When completing the STP, my reportable Gross should be the Net Salary of $4500(Gross - 10%SS). Instead the Gross is being reported and I am not able to work out how to change it.

Question 3. - The same problem then occurs in the BAS, W1, for total wages, salary etc. Should the Total Net amount of $4500 be reported or the Gross amount of $5000. When I read through the BAS documents it appears the Net amount is the correct one. Again, how is this setup in QB Accounts Plus 2019.

To date, I've tried setting up the payroll item for Salary Sacrifice (SS) that has tax tracking type Gross Payments. With this setup I can get the Profit & Loss reports to work correctly, BUT! the Gross amount of wages in STP and BAS, W1, reportable will not show the correct amounts.

Any assistance would be most appreciated.

Mike

Acctd4

Hi Mike

The purpose of Salary Sacrifice is to reduce PAYGW because the PAYGW amount is instead calculated on the pay AFTER the SS amount has been deducted

Your example reflects the standard pay without any SS.

Here’s how it differs with the SS:

Gross Amount = $ 5,000

LESS SS Amount of $ 500 = $ 4,500

(NEW) PAYGW = $ 849 (Calculated on $ 4,500 instead of $ 5,000)

(NEW) Take Home Pay = $ 3,651

These amounts remain unchanged:

10% SS on $ 5,000 = $ 500

9.5% SGC on $ 5,000 = $ 475

Q1 - Yes, with SS or RESC, the tax is calculated on the adjusted gross amount (after SS comes off)

Q2 – Yes, if set up correctly with STP, the adjusted (reduced) gross amount is the figure reported (eg after any SS/RESC) along with the SS/RESC amount as a separate total.

You need to make sure you have set it up as follows:

* Payroll Item Type = “Company Contribution”

* Super Contribution (dropdown option) = “Salary Sacrifice (SS)”

* Tax Tracking Type = “Gross Payments”

* Taxes = All ticked (this allows the PAYGW to calculate on the reduced/adjusted gross)

Q3 – Yes, again the adjusted gross (after SS/RESC) is the amount reported at W1

In your Simplified BAS window, check that you only have your Gross Wages account selected at the W1 label & only your PAYGW liability account at W2.

NB: Also check your Payroll Items are all linking to the correct Expense/Liability accounts - It may be that you have one/some linked to a main header account instead of the specific subaccount …?

Shaz Hughes Dip(Fin) ACQ NSW, MICB

Reckon Accredited Professional Partner Bookkeeper / Registered BAS Agent (No: 92314 015)

Accounted 4 Bookkeeping Services

Ballajura, WA

0422 886 003

shazinoz2@bigpond.com

www.accounted4bs.com

Mike Elliott

Hi Shaz,

Thank you so much for answering all my question with such concise information and instructions.

Using your instructions to Q2. I have now managed to get the correct adjusted gross and PAYGW amounts, thanks!

Is it possible to apply these updates retrospectively, i.e my Payroll entries for this FY 2019-20 to date do not have the correct amounts and I would like to fix them and reissue the STP to the ATO?

Again, thanks for taking the time to address my queries.

Mike Elliott
0467 573 505

Acctd4

Hi Mike Glad you’ve got it sorted

As STP reports YTD amounts each time, provided your payroll figures are now correct, you don’t need to do anything further for STP as your next STP submission will automatically reflect this. However, you will likely need to lodge BAS/IAS revisions (for the Gross Wages (W1) & PAYGW (W2) amounts) If you lodge these yourself via the ATO Business Portal or your myGov account, you can open the relevant lodgements & click on the “Revise ...” button at the bottom of those screens. Shaz Hughes Dip(Fin) ACQ NSW, MICB Reckon Accredited Professional Partner Bookkeeper / Registered BAS Agent (No: 92314 015) Accounted 4 Bookkeeping Services Ballajura, WA 0422 886 003 shazinoz2@bigpond.com www.accounted4bs.com

Mike Elliott

Hi Shaz,

Sorry to disturb you and hope you can help me again with this issue :( Since updating to Reckon Accounts Plus 2020 due to new Tax Tables, I'm starting to have problems again with this Salary Sacrifice and its effect on P&L Reports.

According to my accountant I haven't completed the process correctly for the Last Quarter BAS. As he is not familiar with Reckon he can't help with the setup of Reckon Accounts to fix the issue.

The problem I'm facing is when I run the P&L statement report, the SS amount is showing as profit , i.e -$500, is not being subtracted from the gross wage total, the accountant expects the report to read Gross Wages = $5000 - $500 = $4500?? As I have very little knowledge, (read none!), I just don't know where to start to fix the issue. The accountants work around is to do a Journal entry to circumvent the error, I would like to fix it properly however.

I'm setting up Reckon Accounts again as per our previous discussions but have come up against a few problems.

Just to clarify the setup, I've followed your previous instructions above with some exceptions:

I need to setup a new Item Name in the the Payroll Item List.
Next, Payroll Item Type. Should this be "Company Contribution" or "Super Contribution (Company & Employee ....... etc)? If I choose " Company Contribution", I don't get the option to select "Salary Sacrifice (SS)" on subsequent screens, it goes to a screen asking for "Name used in payments and payroll reports", then "Agency for company-paid liability". If I select "Super Contribution (Company & Employee .... etc), I get the option to select "Salary Sacrifice (SS)".
Depending on which option I select above, I'll choose "Salary Sacrifice" in this case and in the setup Terry mentioned above. This is based on some testing I did with either option, If my setup uses "Company Contribution", the amount is put under Super SGC Expense and not Salary Sacrifice.
The next screen asks for "Agency for employee-paid liability". For the liability account, should this be a type "Other current Liability" i.e Payroll Liabilities\Salary Sacrifice Liability or an "Expense", ie Payroll Expense\ Salary Sacrifice Exp? Again with testing, if I use the "Expense" it shows up on the P&L in RED, i.e profit, on its own line item. This gives incorrect totals , hence the accountants concerns.
Next, "Tax Tracking Type", I've selected "Gross Payments". This screen mentions the amounts paid will appear under "Gross Wages" but this doesn't appear to be the case.
Next, "Taxes", PAYG Tax is selected.
Not based on Quantity
Default Rate and Limit, I've entered 10% .
All payments in contributions included.

In summary, the BAS shows the correct amounts so this is ok. The problem is the P&L reports. I've attached copies to help explain the issue mentioned above.

An help you can offer in solving this issue would be greatly appreciated. Unfortunately we have very few Reckon Partners near to us that i can ask for assistance .

Many Thanks

Mike

0467 573 505

Hi Tony

Did you refer to my original instructions?

If you’d like to email me directly, I’ll come back to you tomorrow in more detail if necessary 😊

Mike Elliott

Hi Shaz,

Thanks for the help, I'll contact you via email.

Regards

Mike