Hi all. I need help regarding my employees income tax.

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  • Updated 2 weeks ago
Hi all. I need help regarding my employees income tax. I am using Reckon One. I have 11 employees who are all employed on a casual basis. They all claim the tax free threshold. I have just sent out their income statements for 2019/2020 and all of them have not paid enough tax. I checked the numbers with the ATO tax calculator and this clearly shows that not enough tax has been taken out. My staff are all paid fortnightly. Could someone help me to understand how this occurred please! I have a few angry staff at the moment.
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Peter Meagher

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Posted 2 weeks ago

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Felicity Bleckly

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I don't really know, but check to see if your tax set up is based on fortnightly payments. Also when you do a pay run you can go to the bottom of the screen and check the tax...do it next time and compare it with the ATO schedule to make sure the right amount of tax is being deducted. It's a start point!

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Peter Meagher

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Thanks Felicity. I did check and definitely set up for fortnightly payments. I will check on next payrun re comparing with ATO.
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Kris Williams

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What are the details for one employee for one previous pay, gross and tax?
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Peter Meagher

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Hi Kris. Here are a few examples
Gross: $1413.00. Tax: $101.00
Gross: $719.00. Tax: $0.00
Gross: $1239.00. Tax: $50.00
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Kevin Russell, Accredited Partner

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You're in trouble. You need to ring ATO and get this sorted. No one here can help you. Please, don't delay. This is of the utmost emergency.
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Kris Williams

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First and last significantly undertaxed. I just tested this in my file, have you setup the employee - in their details, to be fortnightly pays? Mine is working exactly as per the ato calculator. Fortnightly tax on 1413 should be 162
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Kevin Russell, Accredited Partner

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Kris the advice is the same. Peter needs to contact both the staff AND the ato. Its too late to change the wages now
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Kris Williams

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I realise that, just trying to help him find out why the problem has occurred
(Edited)
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Peter Meagher

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Thanks. I have never checked the tax and have just trusted the software. It would seem that I have done something wrong when setting up but I just can’t find the problem. All are set up for fortnightly pays. All are claiming tax free threshold and you don’t know where else to look.
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Kris Williams

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Ok that sure is a mystery. You will have to take Kevin’s advice but I am still happy to help with finding out what is wrong with the setup. Call me if you wish 0415940843
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Peter Meagher

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Hi again.
I think I have just found the problem guys.
When completing the employee details under the 'Employment' tab ‘Weekly hours’ title there are a series of boxes to complete.
The last one is titled 'weekly hours' which I have left blank as all my employees are casual and all work a variety of hours. I didn't realise that the purpose of this box is for the software to use the appropriate tax scale (at least I think that's why). I have been over and over the set up videos and all the examples are for full time workers and 38 hours is entered in the weekly hours box. My thought was that is how many hours a full time employee is required to work, hence, the reason for putting in 38 hours.
Anyway I have a pay run at the end of the week to put this to the test but I am pretty sure that is the fix. So much to learn.
Thanks for all your input  and if the fix is really the fix we can all leave it alone now but if the fix turns out not to be the fix then I will post again with my worries.
Thanks again, Pete

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Kris Williams

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I don’t think this is the answer, I only have 1 hour in most of mine because they work odd hours and in some I have none. The appropriate tax scale has to be entered by you in the tax tab of each employee, that is what the amount of tax deducted is based on after you enter the number of hours in the pay run 
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Peter Meagher

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Mmmmm. I thought I had it. I say that as I trialled it on our last payrun numbers on one employee and the tax changed and it was in line with the ato calculator.
Back to the desk for me.
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Peter Meagher

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It’s all very strange. Every time I calculate tax based on 38 hours entered into the weekly hours box I get the correct tax findings.
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Kris Williams

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And what if you put in less hours, is the tax correct? If it is leave the 38 hours per week in the setup as you tried, it won’t hurt and you may be onto something.
(Edited)
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Peter Meagher

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I haven’t tried any less hours but will give it a go tomorrow. Hopefully all will be ok. My accountant has had no luck today so maybe this will ease the burden for him. Are you employees hired on a casual basis Kris?
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Kris Williams

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Yes they are, I am happy to look at your file if you wish. Call me if you need to 0415940843
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Peter Meagher

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Thanks for the offer Kris. My accountant is going over our file currently. We may even switch to MYOB Essentials as our business has been growing a bit more rapidly than we anticipated. Although I am hesitant about doing that as the migration process could create another headache.
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Kris Williams

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Ok I hope it all works out. I would be keen to hear if you find anything wrong with your setup
Personally I would stick with Reckon, but then I’ve been using Reckon / Quickbooks for over 20 years so am a bit biased
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Kevin Russell, Accredited Partner

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Pete Kris is right. Changing systems won't help if you don't understand the concepts. I use essentials every day. Don't kid yourself that its easier. And at the risk of appearing to repeat myself, you need to understand what you are doing. Or pay someone to do it for you. Its not possible for business owners to be expert at everything. And you shouldn't expect it of yourself.