Payment Summary not showing FBT Correctly

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Hi.  My Payment Summaries are not showing the correct FBT Amount.  I am putting in Grossed Up Value in Employee's Cheque before 31st March 2018 as described in a post by John G. Information Support Analyst.  But the Payment Summaries showing only the taxable value not the Grossed up Value.  We are using Reckon Accounts Premier 2018.  

I have created two new payroll items - FBT Contribution and FBT Deduction.
       - For FBT Contribution payroll ITEM - Tax Tracking Type - FBT (Tax Exempt). 
       - For FBT Deduction payroll ITEM - Tax Tracking type - None.

Into the employee's pay cheque before 31st March 2018, I put in FBT Contribution as $14,999.85 and FBT Deduction as -$14,999.85 (Grossed Up Value).  But on the Payment Summary it shows a different figure.  Please see the screenshot below:-  

Employee Cheque 




Payment Summary 



The taxable value of the employee is $7949.89.  If we multiply this by the Grossed Up Rate i.e. 1.8868 which comes to exactly $14,999.85.  But the payment summary shows incorrect amount.

Please Help.  Thank you. 
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Ashu

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Posted 4 months ago

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Charles van Rotterdam

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Ashu the FBT deduction goes against "Gross Payments". It goes there in order to reduce the PAYG paid.


I'd be doing the salary sacrifice on a pay run basis
(Edited)
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John Graetz

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Ashu.  I presume that you are talking about the Reportable Fringe Benefits Contribution (RFBC) non value entry to be processed under a date by 31st March at the latest for the Fringe Benefits included in your Annual FBT Return.  You appear to have added confusion by just talking of FBT.  Your screen shot above indicates that your are talking about RFBC.
You have set up your payroll items, it appears, by saying that the Tax Tracking is Reportable Fringe Benefits (tax exempt).  Does this mean that you are an FBT Tax Exempt Body e.g. a PBI?

Providing you are a PBI or similar, your set-up, on the face of it, appears to be spot on.  There does not seem to be any logical reason for the amount to be reduced on the payment summary to $5,884.  From what I am aware of from the ATO website, the staff member of a PBI who has fringe benefits, still has them reportable on the payment summary, even though they do not generally attract FBT.

My only conclusion therefore is that there is a problem with the way that Reckon is treating this, because there seems to be no reason that I am aware of, that causes the amount to be shown as anything other than what you have inputted.

This now appears to be an issue for Reckon to address or for you to take up with them.
John L G
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Ashu

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Hello John, 

Sorry for the confusion.  Yes, I was talking about RFBC.  We are a PBI.  Therefore, we are exempt from any Fring Benefits Tax.   I do not know why the RFBC is reducing on Payment Summary when I am putting in the Grossed Up Value to report on Payment Summaries. 

We have at least 35 employees who are on the Fringe Benefits.  I already have written to Reckon Customer Support for any answers.  I have not heard back from them yet.

Thank you.

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Charles van Rotterdam

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Ashu I had something similar with one of my clients this year as well.

But what you seem to have done is make the FBT deduction the same as the grossed up value whereas it should stay the same as to what was actually taken out ie 7949.89 and then you add the FBT Grossup figure (Company contribution > RFBT Tax Exempt) of 7050.11 which will then add up to 14999.85.

AS I said before the FBT Deduction goes against Gross Wages not None

If you want you can give a call on 0266834083 or charley@vannrotterdam.com.au


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Ashu

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Hi Charles,

I have tried putting in 7050.11 but it further reduced the amount to 2064.  I have come up with putting in 24115.70 which in turn shows 14,999 on payment summary.

14999 x 1.6078 gives you 24115.70 thats how I come up with. 

But this is not the solution as I have another 30-35 employees.  I will phone reckon technical support tomorrow morning to have this sorted.  Below is the link which states on how to enter the RFBC amount on Payment Summaries.

https://community.reckon.com/reckon/topics/how-do-i-enter-the-grossed-up-reportable-fbt-for-relevant-employees-on-their-inb-payment-summary-i-called-reckon

 When I followed those steps, entered the Grossed Up Amount, the amount reduced on the Payment Summary e.g. if I entered 14,999.00, the amount on payment summary was 5884.




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John Graetz

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Sorry Charles.  In this instance I have to disagree with you.  This is purely a transaction to get the RFBC to appear on the Payment Summary.  It is purely the use of the grossed up value, at the lower rate, to ultimately record an effective non value transaction.  The setup has been exactly as directed by Reckon employee John G.  The end result, as reported by Ashu is a total mystery.  I have tried many mathematical equations to try and arrive at the end result, without succless.  The end result, to me as well as Ashu, does not have any logic attached to it.
However, I setup the RFBC Payroll differently to Reckon and used the same Liability Account and Expense Account, so that the two net themselves off without having any strange entries in either the P&L or Balance Sheet.  I have now, created a new Payroll Item, as a test, and used my method to set up a RFBC PBI payroll item,then ran a special 31 Marchh pay and it worked perfectly, showing the correct figure on teh Payment Summary.  Therefore, there must be something else with your setup Ashu which is not correct.  Here is how I believe the setup of the item should be (and it works)
1.  Payroll Item Type = Company Contribution - did you do this?
2.  Tax Tracking Type = Reportable Fringe Benefit (Tax Exempt)
3.  Taxes = blank/nothing
4.  Gross vs Net = Gross
I have not changed your general ledger accounts you used, even though I know that mine work.  I now suggest that you have a look and see how your setup compares to mine as either yours is not the same or else you have a corruption somewhere.  Perhaps you might try a new Payroll Item setup, similar to mine and use it and see what happens.  This could get very interesting.
John L G
(Edited)
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Ashu

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Hello John,

I have created two new Payroll Items. 

1.  FBT Contribution (entered positive amount)
     Type - Addition
      Account - FBT Expense Account
      Tax Tracking - Reportable Fringe Benefits (Tax Exempt)
      Taxes - None

2.  FBT Deduction (entered negative amount)
     Type - Addition
     Account - FBT Expense Account
     Tax Tracking - None
     Taxes - None

So you are saying that I should select Taxes "blank/nothing"  for both the items. 

Where should I say Gross Vs. Net?

Could you please advise me?

Thank you John.


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John Graetz

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Ashu.  It probably doesn't matter whether whether it is gross or net.
However, the big problem that I see is that your setup has the items classified as Additions whereas my understanding is that they should be Company contributions instead, which I specified above.  This is probably the reason that they are not working properly.
John L G
(Edited)
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Ashu

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Ok.  I understood.  I will try.  However, I completed the payment summaries by working out the amount which will in turn show the correct Grossed Up amount on payment summaries. I finished this for one organisation for about 8 employees.

I have another organisation's employees to put the FBT amounts in.  I will set up as you advised.

Do I need to set up both items (FBT Contribution and FBT Deduction) as Company Contributions?

Thank you so much for helping. 





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John Graetz

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Ashu.  I am currently holidaying in Qld, so this will be my last response until late in the day.  My concern with your setups, is that they may have unintended consequences with either your balance sheet or profit and loss.  I know that my way works, it does not affect either the balance sheet or profit and loss, I have only one line to enter into the special 31 March pay run and it reports correctly on the Payment Summary.
Where you have manipulated amounts to get the correct end result, I have no idea as to what else you could be affecting.
In your setup, my opinion is that both are probably meant to be Company Contributions.  If you choose additions, then they become a value item which could then affect something on your profit and loss - they may net one another out, but I am unable to do testing at my end at present.
In the end, it is your choice.  I know that my way works without any other consequences.
John L G
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Ashu

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Hello John,

I have tried creating new payroll items as Company Contributions and putting the cheque as at 20th March 2018.  This did not work as well. Here is my screen shot

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John Graetz

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Ashu.  This result is now worse than your first.  Something is still wrong.  Here is what I did in my test and it worked perfectly:
1. Create Payroll Item called Reportable Fringe Benefits
2. Payroll Item Type = Company Contribution
3. Give it a name e.g. Reportable Fringe Benefits PBI
4. Agency Information - Liability Account - choose an existing one or create a new one
5. Agency Information - Expense Account - choose the SAME liability account as in the previous step.  You will get a query come back to you - ignore it.by selecting YES
6. Tax Tracking Type = Reportable Fringe Benefits (Tax Exempt)
7. Taxes - untick everything - this is a non value payroll item
8. Moving on, I chose Gross Pay rather than net pay.  As a non value transaction, it should not matter.  All this does basically is determine where the item will show on the Payroll Summary Report.
9. "Include payment in contribution" window - untick everything.
10. Create special pay run dated no later than 31 MARCH..  For selected employee, pull up the item you just created in the Other Payroll Items box and enter the grossed up amount for the value.  Your pay check should now show a zero value with no tax calculated.  There is no second entry for my way - they are all in the one line.
11.  Click OK and all is done,
This works - I have tested it for you.
John L G
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John G, Information Support Analyst

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Hello Ashu, Charles and John,

Thanks for your contributions  I'll have a good look at it.  My first shot has the Payment Summary reporting the figure correctly (using RAB Ent 2018 R1, following KB5148 )







so please have a good look at the setup of your FBT items.
Also, have other FBT items been passed in the year for this employee that could account for a variation in the amount displayed?


regards,
John
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John G, Information Support Analyst

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Hello Ashu, charles, John,

I have not been able to make the Payment Summary show a different amount to the pay.

Do you have other payroll items assigned to the FBT exempt Tax Tracking type?  Check the Tax Tracking column on the Payroll Item List.


regards,
John.
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John Graetz

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Ashu.  Following on from what John G has said, the idea would be to run your payment summary BEFORE you make your entries for RFB.  That will quickly determine if something else has been entered incorrectly during the year which shows up in the RFB box.
John L G
(Edited)
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Ashu

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Hello John G,

We have been putting in Fortnightly contributions using FBT Pre-Tax Deduction and FBT Post-Tax Deductions items in the fortnighlty pay runs.

These two items were set up as Deductions, Tax Tracking Type - None.  I think this is the issue. May be I need to change these two items as Tax Tracking Type - Reportable Fringe Benefits (Tax Exempt). 

Also, John Graetz - I will follow your steps to create a new item. I was adding the new payroll items (FBT Contribution and FBT Deduction) into the pay cheque processed on 20/03/2018.  After reading your steps, I will try to run an unschedule pay run and create new cheques for the employees who have RFBC. 

Thank you so much for help.


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John G, Information Support Analyst

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Hi Ashu,

The FBT tax tracking type payroll item should only be used to post the reporting requirement as notified by the accountant.  Other arrangements should be taken into another account.  What constitutes the FBT benefit is not a straightforward calculation, and then it is grossed up, so its calculation, and accumulation of any contributions, is best done elsewhere.  

regards,
John
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Ashu

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Thank you John G.  I have understood.