Lump Sum E showing in Gross Payments

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I have an employee who has a lump sum E payment for backpayment greater than 12 months; and the amount is included at both lump sum E (correct) and in gross payments (not correct) on the payment summary. Tried both 17/18 & 18/19 payroll both versions have the error. I need this rectified ASAP obviously as i need to distribute her payment summary.
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Kali

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Posted 1 year ago

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Jay Jay Li, Employee

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Hi Kali, 
This is not an error, this is by design.
The ETP Payment Summary takes the Tax out of the INB Summary PAYG amount.

So if you add the ETP & INB PAYG amounts, it should equal what the employee has actually paid in tax.

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Kali

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Hi, this is not an ETPayment.. and I’m not talking about the PAYG component. The gross amount of the Lump Sum payment is showing at both Lump Sum E & Gross Payments on the PAYG Payment Summary which is incorrect. According to ATO lump sum amounts should NOT SHOW in Gross Payments on the Payment Summary.
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Jay Jay Li, Employee

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Hi Kali,
Sorry we misunderstood thinking you were doing termination with ETP.  for back pays older than 12 month. 
If you are using payroll premier, the lump sum E must be processed using the Sundry Tab during the payrun.  if you do not have Sundry tab during the pay. go to preference and tick the box under the general to enable Sundries. 
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Kali

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That’s exactly how I’ve processed it.
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Simon Hutchinson, Employee

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Hi Kali

We've just checked the 2018/19 software and 2017/18 software and it is displaying correct for both new and upgraded files in both versions for us.

Can you please go back to the specific pay where the sundry was paid and ensure it looks like the below.



As you can see in our pay here we have 9001 of backpay > 12 months sundry a gross of 520 from the rest of the pay, and therefore its being split out in the pay.

A copy of the payment summary generated can be seen here to show that it has also been split and the amount not included in gross.

(Edited)
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Kali

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Yes, but the payment shouldn't be excluding PAYG i.e you have 'YES' selected at the 'Ex Tax' option which is incorrect.
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Simon Hutchinson, Employee

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Hi Kali

By selecting ex tax no this is why it is appearing in gross. It is also using the employees current FY tax tables and not the backpay tax tables Due to the rules around the Lump Sum E payments from previous financial years, using ato back payment tax table, you need to work out the tax yourself via the ATO methods system (Generally method c, please check with a accountant). Please see this ATO document and adjust accordingly based on the number of pay periods the employee gets etc.

https://www.ato.gov.au/assets/0/104/1328/1465/4946a0f8-faae-4953-a213-fec8465f58ec.pdf

So to summarise, generally it will be method c if backpay >= 12 months and then edit the payment being made to the employee to include the additional tax, which will then report in the total PAYG field correctly, and not in the gross field as per the current problem. The NAT 3348 (back payment) table is not in payroll premier

Instructions from the help file

"Calculating tax on back pay

 

Due to the complexity and number of factors to consider when paying back pay, Payroll Premier does not calculate the tax on back pay. For a pay that includes back pay, you must:

1  Write down the tax amount before back pay is calculated.

2  Manually calculate the tax on the back-pay as per ATO instructions. (PDF above)

3  In the Pay Totals section, click on the Tax box, and add the back pay tax to the calculated tax amount, using the Q-Calc window."