How do I set up a salary sacrifice super account so the tax is reduced correctly?

  • 3
  • Question
  • Updated 4 years ago
  • Answered
  • (Edited)
I am taking over from the normal accounts person while on holidays and have just found that an employee that has a monthly Salary Sacrifice Super deduction has not been taxed correctly. He has been taxed the on the full gross amount. How do I set this up correctly so that the salary sacrifice reduces his tax payment?
Photo of Karen

Karen

  • 120 Points 100 badge 2x thumb

Posted 6 years ago

  • 3
Photo of Karen

Karen

  • 120 Points 100 badge 2x thumb
Write a reply
Photo of John G

John G, Information Support Analyst

  • 27,530 Points 20k badge 2x thumb
Hi Karen,

Welcome to the Reckon Community.

Use the super payroll item Salary Sacrifice (SS) and ensure its configuration is set to Gross Payments for Tax Tracking type and PAYG Tax ticked for Taxes. In the final screen ensure all payroll items that are included for Super calculations are ticked.

More information on super salary sacrifice is available in this guide:
http://www.reckon.com.au/library/pdf/Super%20Salary%20Sacrifice%20in%20QBI.pdf


regards,
John.
(Edited)
Photo of Reckon FAQs

Reckon FAQs, Employee

  • 10,148 Points 10k badge 2x thumb
Hi Tim,

Expense accounts appear in the Chart of Accounts and not in the Payroll Item List.

When setting up a Salary Sacrifice super payroll item you only need to specify a Liability account to hold the funds until you forward them to the super fund.  The money comes from the Employee's salary and wages and is withheld by the business.  




When forwarding to the super fund, use Employees > Payroll Taxes and Liabilities > Create Custome Liability Payments.

Hope this helps,

regards,
John
Photo of Tim Cross

Tim Cross

  • 640 Points 500 badge 2x thumb

Hi John,

Thanks for that. I guess I could also set up a memorised transaction for the monthly remittance of the super withheld under salary sacrifice. Obviously Reckon automatically adjusts the tax paid net of sacrifice and shows it on the PAYG Summary at years end I assume?


Regards Tim

Photo of John G

John G, Information Support Analyst

  • 27,530 Points 20k badge 2x thumb
Hi Tim,

The article outlines 3 ways to apply Super Salary Sacrifice, each having a different effect on Tax paid, so please follow the one that fits your circumstances.

To clear a Payroll Liabilities account and show it correctly on reports you need to process the payment through the Pay Payroll Liabilities function.  It processes like a "Write cheque" but has the type: "Liability Cheque".  

Hope this clarifies the situation.


regards,
John
Photo of Tim Cross

Tim Cross

  • 640 Points 500 badge 2x thumb

Hi John,

Thanks again. Unfortunately link to article comes up as "not available".

Tim


Photo of John G

John G, Information Support Analyst

  • 27,530 Points 20k badge 2x thumb
Hmmm....
interesting.  

Works for me on Firefox and IE, but fails on Chrome.  That said, run it through IE TAB in Chrome and it works.  

regards,
John
Photo of Karen

Karen

  • 120 Points 100 badge 2x thumb
Thanks for your help John, it was set up incorrectly. All good now except this hasn't affected the payroll already done this year, any idea how I correct them? Will it just be a journal entry?
Photo of John G

John G, Information Support Analyst

  • 27,530 Points 20k badge 2x thumb
Good to hear the source of the error has been corrected Karen.

The first thing you should do is refresh the Employees' Records for the changes to the Salary Sacrifice item by deleting it and re-entering.  Then on the next pay the correct processing will happen.

How to correct the existing errors you'd best talk to your Accountant and follow his directions.  

Generally you have withheld too much tax.  The easiest way to return it is to under-tax the next pay periods until the difference is covered.  

You can't just do a Journal entry as the adjustment must pass through the payroll module to properly affect the employees' payment summaries and your reports.  

Maybe some other Community contributors may be able to provide some solutions?


regards,
John.
Photo of Karen

Karen

  • 120 Points 100 badge 2x thumb
Thank you John, I will discuss this with our accountant.
Photo of Tony - Systems Consultant

Tony - Systems Consultant, Alum

  • 534 Points 500 badge 2x thumb
Hi Karen,

Have you processed a cheque for Payroll Liabilities (PAYG Tax) to the ATO yet? If you have not you can create a "Deduction" item and include this item in an existing pay to reduce the amount paid to correct the tax difference.

This process will result in the PAYG amount being included in the Payroll liabilities account which you can write off when you process payroll liability payments and write it off on a cheque.

Regards,
Tony

Photo of Tony - Systems Consultant

Tony - Systems Consultant, Alum

  • 534 Points 500 badge 2x thumb
Hi Karen,

Whoops - I think I did not stress one key point.  Let me clarify this procedure so we are on the same page

1. Change the settings in your Super Salary Sacrifice:
  - Tax Tracking Type = Gross Payments
  - PAYG Tax = Enabled (Checked)

2. Refresh affected pays (Net Pay will now be higher)

3. Enter the deduction item to reduce this net pay to what it should be.
  - Deduction Item settings: 
  - Tax tracking = None
  - PAYG Tax = Disabled (Not checked)

4. Payout difference to employee or include an additional pay item in the next Pay

Apologies for any inconvenience caused. 

Regards,
Tony

This conversation is no longer open for comments or replies.