I am wanting to pay staff a christmas bonus but not sure how with STP

Marilyn Strauss
Marilyn Strauss Member Posts: 19
edited July 2020 in Accounts Hosted
I am wanting to pay staff a Christmas bonus but not sure how that will work with STP

Comments

  • Kris_Williams
    Kris_Williams Member Posts: 3,272 Reckon Accounts Hosted Expert Reckon Accounts Hosted Expert
    edited May 2020
    Won’t make any difference to STP - just pay bonus and work out correct tax and setup a rate called bonus. Then export STP file as usual
  • John Graetz
    John Graetz Member Posts: 1,651 ✭✭✭
    edited July 2020
    Hi Marilyn.  This would be just another payroll item that you add to each person's pay. As such it is not an STP issue, but will be reported the same as every other item on the pay slip/pay record.
    John L G
  • Sue_10075371
    Sue_10075371 Member Posts: 41
    edited December 2019
    I'm about to do the same.  I think I'll just be processing it the normal way because a Christmas bonus is considered to be part of the annual wage and has a tax component as well.  I work this out in Excel using the ATO's formula for bonuses - can't just let Reckon Accounts work out the tax because the tax is more that what Reckon would usually calculate.
  • John Graetz
    John Graetz Member Posts: 1,651 ✭✭✭
    edited July 2020
    Sue.  It has a fair bit to do with the size of the bonus and how long the pay period is in which it is being included - weekly, fortnightly, monthly.  If it is small, it really would not make a great deal of difference, but if large, your approach is probably the best way of handling it.
    John L G
  • Marilyn Strauss
    Marilyn Strauss Member Posts: 19
    edited December 2019
    If it is added to the normal pay run then the tax is crazy.
  • John Graetz
    John Graetz Member Posts: 1,651 ✭✭✭
    edited July 2020
    Hence the reason that Sue is taking the ATO approach to effectively average the payment over a period of time.
    John L G 
  • Kris_Williams
    Kris_Williams Member Posts: 3,272 Reckon Accounts Hosted Expert Reckon Accounts Hosted Expert
    edited July 2020
    I usually divide the bonus by 52 and see what difference the tax would be per week if added to a normal weekly pay. Then multiply that tax difference by 52. But this only works if each week’s pay is similar amount every week
  • Sue_10075371
    Sue_10075371 Member Posts: 41
    edited December 2019
    I calculate it because otherwise our employees would end up owing the taxman...
    This is what I got from the ATO (this example is from a few years ago).  Hope this is helpful.
    Bonus Calculations - Sample
    Total income last 12 months 41,494.60
    No weeks worked this year 52
    Average pay 797.97
    Tax on above 112.00
    Bonus 1,064.00
    Taxable income + bonus 42,558.60
    New average pay 818.43
    Tax on new average pay 119.00
    Difference in tax 7.00
    Difference in tax x weeks worked 364.00
    Balance of bonus minus tax 700.00
  • John Graetz
    John Graetz Member Posts: 1,651 ✭✭✭
    edited July 2020
    Excellent, Sue - spot on!
    John L G
  • John Graetz
    John Graetz Member Posts: 1,651 ✭✭✭
    edited December 2019
    Hi Kris. The purpose of the exercise, as detailed by Sue. is to average the whole of the pay over the whole of the year and then arrive at an average week per year.  Apply the averaged bonus to the average pay, calculate the difference in tax between that of the average pay and the average pay with bonus, to arrive at the extra tax per week (in this instance) for the 52 weeks of the year.  Using this approach smooths the pays over the whole of the year to arrive at an average, which then takes account of any variances from the norm during the year.
    John L G
  • Kris_Williams
    Kris_Williams Member Posts: 3,272 Reckon Accounts Hosted Expert Reckon Accounts Hosted Expert
    edited December 2019
    Yep that’s what I was meaning