Reckon Accounts Enterprise 2016 - Incorrect tax

  • 1
  • Question
  • Updated 3 years ago
Hi
I'm using Reckon Account Enterprise 2016 and when i run a payroll it is over taxing all staff. I was using 2015 but I've updated to 2016 and made sure the 2016 Tax Table is installed as well. Which it is.
Does anyone have any idea's that might help me? I know I can manually change the tax amounts each pay but i don't want to do this ongoing. The tax is out between $50 - $200
Thanks :) 
Photo of Bec Needham

Bec Needham

  • 164 Points 100 badge 2x thumb

Posted 3 years ago

  • 1
Photo of John Graetz

John Graetz

  • 24,332 Points 20k badge 2x thumb
Hi Bec.  If this has only just started happening, there is a possibility that a general corruption could have occurred to the employee's record.  A couple of things that I would be looking at first would be:
1.  Check the Tax label in the employees record.  Is the code set as 2-TFT for most/all people?  Has one of the other HELP, SFSS or CDEP been ticked when it shouldn't have been?
2.  Check out the SGC properties for each fund.  Has tax tracking changed from none to gross payments?
John L G
Photo of Bec Needham

Bec Needham

  • 164 Points 100 badge 2x thumb
Hey John
Thanks for the reply. I think this has been going on for a while and as I am only new here i just found it :) 
I have checked the Tax label and this is correct for all staff and the SGC is on none for all funds.
Do you have any other ideas??
Thanks again 
Photo of Jo Homer

Jo Homer

  • 60 Points
I am having the same issue with Reckon Accounts Premier as Bec. For some employees it is calculating the PAYG incorrectly and for others it is ok. All employee records are set at 2-TFT and SGC properties as John suggested are set for tax tracking at none. Any other suggestions other than manually changing them every pay period?
Photo of Kevin Russell

Kevin Russell, Accredited Partner

  • 52,130 Points 50k badge 2x thumb
There is something wrong with the file. Have you tried using the tax tables in the sample company? If the tax table release number is current it should be acvurate. Why dont you compare it to the ato website.
Photo of John Graetz

John Graetz

  • 24,332 Points 20k badge 2x thumb
Hi Bec and Jo.  You are starting to make this hard :).  
Next question -  1. What are you comparing it against to know that it is wrong?
2.  Back to the employee's record and the tax label - is anybody set to have extra tax taken out each pay?
3.  How often are your pays being run?
4.  Please provide details of the components for one of the pays which is out, including the salary and SGC figures and any other items, including any deductions.  You can cloak the name of any deductions, for the purpose of this exercise, if you want to.
John L G
Photo of Bec Needham

Bec Needham

  • 164 Points 100 badge 2x thumb
John - I am comparing it with the ATO. It is my pay where i found the mistake and on checking the other workers found theirs is wrong too. 
I am set as 1 - NTF so expect to pay more tax
My pay is fortnightly and I was using the ATO fortnightly calculator 
I have attached a screen print :) Good luck :)
Photo of Kevin Russell

Kevin Russell, Accredited Partner

  • 52,130 Points 50k badge 2x thumb
Have you tried the sample company?
Photo of Bec Needham

Bec Needham

  • 164 Points 100 badge 2x thumb
not yet I will try this 
Photo of Reckon FAQs

Reckon FAQs, Employee

  • 10,138 Points 10k badge 2x thumb
Hi Bec and Jo,

Welcome to the Reckon Community.

Please take John's suggestions to firstly re-sort your lists (payroll items, Names List, Chart of Accounts) and rebuild the file to eliminate corruption as the source of the error.  Then check your payroll item setup and choices for your employees.

On what grounds do you believe an incorrect amount has been calculated?  The ATO has a tax calculator that you can check the outcome against.

The only changes in the tax tables for the start of 2016/17 has been in threshold levels for HELP and SFSS, so if any employees have these options selected, rightly or wrongly, their first pay of 16/17 will vary from their last pay of 15/16.

Hope this helps.


regards,
John
Photo of Bec Needham

Bec Needham

  • 164 Points 100 badge 2x thumb
Hi John

I have just started with this company and noticed my pay was out by quite a lot - i was earning the same amount at my previous company. When i started looking into it i noticed how much tax i was paying and looked on the ATO website to see what my tax should be it is here i found the mistake. I have upgraded from 2015 to 2016 today and tried to run a payroll and it is taxing me the same (higher) amount. Speaking to one of the other people that work her this may have been going on for about 12 months. On the positive we aren't under paying PAYG!! 
Thanks :) 
Photo of Kevin Russell

Kevin Russell, Accredited Partner

  • 52,130 Points 50k badge 2x thumb
John yeah i suggested checking ot against the ATO tax withheld calculator. Its the obvious starting point. You can also test the sample company to see if it is doing the same thing
Photo of Neil

Neil, Employee

  • 2,046 Points 2k badge 2x thumb
Hi Bec,

Edit the Australian Super Item and untick PAYG on the below window, after this, if you start a new payrun the correct PAYG will be calculated.




Photo of Bec Needham

Bec Needham

  • 164 Points 100 badge 2x thumb
Thanks for the suggestion Neil 

Here is the result - still wrong 


Photo of Neil

Neil, Employee

  • 2,046 Points 2k badge 2x thumb
Hi Bec,

Where is that spreadsheet from? Is it from the ATO?

If you look at the latest ATO Tax Table at the below link It says the Tax on $2,508.00 is $884.00

https://www.ato.gov.au/uploadedFiles/Content/MEI/downloads/Weekly-tax-table-2015-16.pdf

(even though this is the 2015/16 Tax Table it is the same PAYG for 2016/17 for this Scale)
Photo of Neil

Neil, Employee

  • 2,046 Points 2k badge 2x thumb
Actually, I just saw on the top left of your spreadsheet that its for Fortnightly Pays but your Employee in Reckon Accounts is set to Weekly.
Photo of Bec Needham

Bec Needham

  • 164 Points 100 badge 2x thumb
Thanks Neal I will fix this 
Photo of Kevin Russell

Kevin Russell, Accredited Partner

  • 51,496 Points 50k badge 2x thumb
Oh for goodness sake.
Photo of Reckon FAQs

Reckon FAQs, Employee

  • 10,138 Points 10k badge 2x thumb
Hi Bec,

Check the setup of your Australian Super payroll item - what is the Tax Tracking Type set to?  It should be None.


regards,
John.
Photo of Bec Needham

Bec Needham

  • 164 Points 100 badge 2x thumb
I will check this as well.
Hi Bec

I cannot see the top of the payslip but the dates as suggested are weekly dates,to & from.

However I have noticed that the leave accrual is not correct, for either weekly or fortnightly pays.

You have paid yourself 76hrs which suggests fortnightly, is you scheduled pay run set to fortnightly, it has to be otherwise it want tax over a 2 week period and it will increase the tax and tax on a weekly basis on 76hrs.

Leave on 38hr week for Holiday leave accrues at 2.923hrs per week or 5.85hrs per fortnight pay.

Personal leave if 10days per year is 1.46hrs per pay period weekly & 2.92 per fortnight... if 8 days then it is 1.17 per pay period weekly & 2.34 per pay period fortnightly.

If your leave is for every hour worked then the accrual is still not correct.

Kim: 0429 305300  e: Kim@kwikbooks.com.au
Photo of John Graetz

John Graetz

  • 24,332 Points 20k badge 2x thumb
Hi Kim.  I am sorry but I have to disagree with your accrual rate, although you are likely to have many people who tend to agree with you.  Your calculation is based on there only being 364 days in a year (52 weeks) which means that four weeks leave will accrued after only 364 days.  Over a four year period, your accrual rate will accrue on an extra 5 days.  This results in an over accrual of 2.923 hours over that four year period.  Based on Bec's hourly rate of $33 that equates to an overpayment of $96.46 over that four year period.  Perhaps $24 per year doesn't sound like much but when you factor this in for say 20 employees, that amounts to an overpayment of $480 per year.  This is the unknown cost for every employer who elects to calculate everything based on only 52 weeks or 364 days in a year.  There are actually 365.25 days in an average year over which the accrual should be calculated.
Now let's take this one step further.  When it comes to inputting an annual salary rate, the problem gets a lot worse.  Reckon elects to calculate a weekly rate for a salary as being based on 52 weeks in a year or again, only 364 days.  What this means is that over a four year period, anybody relying on the Reckon method of calculation will have a hidden extra cost which equates to that employee gaining an extra 5 calendar days of pay over that period of time.  If we assume that an employee is paid $50,000 per annum that works out to $961.54 per week.  But when we factor in what happens over a four year period, with an average of 52.21429 weeks per year, we find that the correct weekly rate should only be $957.59 per week.  That now equates to an overpayment of $3.95 per week, or in excess of $205 per year.  Multiply that by 20 employees and suddenly we find that salaries are being overpaid by more than $4,000 per year.  Or to state it another way, for every $1,000,000 of salaries, there is a hidden extra cost of more than $4,000 per year.  Not a bad bonus for employees, but costly for the employer.  That is the effect of Reckon refusing to recognise that there are not 364 years in a year.  I have brought this to their attention on a number of occasions, but have never ever had a response.  
You can call me a purist or pedantic if you like, but I like being accurate instead of being negligent in just following the crowd.
John L G
Photo of Kevin Russell

Kevin Russell, Accredited Partner

  • 52,120 Points 50k badge 2x thumb
John the appropriate accrual rate is 4/52 or 7.6923% of normal hours. This us the correct way to set it up. Of course personal leave is half this. If you stick with this rather than a fixed rate you cant go wrong
either way, you want to split hairs, Reckon doen't allow for any more than a 2 digit after dec.pt accrual rate, it has always had that flaw.

However you want to split minute hairs a Pers. leave of .46 and A/L of 4.23 accrual on a weekly or fortnightly pay is still wrong!!!!
Photo of Kevin Russell

Kevin Russell, Accredited Partner

  • 52,120 Points 50k badge 2x thumb
Nice point KB
Photo of John Graetz

John Graetz

  • 24,332 Points 20k badge 2x thumb
Kim.  I will clarify what I meant to convey, which ended up getting stuffed up because of a transcription error.  In the first instance, I totally agree that the accrual hours Bec was using were wrong.
In the second instance, I maintain that the correct accrual rate is not 2.923 hours per week based on 38 hours because that factor relates to only 364 days in a year (52 weeks x 2.923 = 152 hours rounded).  However, as there is an average of 365.25 days per year over a four year period, the calculation becomes 2.913 hours per week.  Yes I agree, that this is a relatively small gain amount of a little over $17 per year, using Bec's hourly rate.
Kevin.  Using a percentage of usual hours is a useful way to go.  However, the rate that you use of 7.6923% is still flawed because again, it is based on the incorrect assumption that there are only 364 days in each year, which doesn't tally with any of my calendars.  The correct rate should in fact be 7.666% instead (4 / 365.25 * 7).
I am aware of at least one modern Enterprise Agreement which correctly addresses the number of days in each year by determining that there is an average of 365.25 days each year which equates to 26.09 (rounded) fortnights in a year which is actually specified as such in the Agreement.  That calculation is based on 365.25 (average days per year) / 14 (days per fortnight) arriving at an actual number of 26.089 fortnights.
We might be talking "chicken feed" when dealing with annual leave, but when it comes to people inputting annual salaries into Reckon, Reckon's approach to using a factor of only 52 weeks in a year is having a far more dramatic effect.  For every $100m input as salaries, it is costing employers more than $400,000 per year, because of this wrong approach.  That is not what I call "chicken feed".
John L G
Photo of Kevin Russell

Kevin Russell, Accredited Partner

  • 52,120 Points 50k badge 2x thumb
Gee John i dont have any clients with a hundred million dollar payroll. I wonder how many businesses in that space will be using Reckon Payroll. Anyone got an answer?
Photo of John Graetz

John Graetz

  • 24,332 Points 20k badge 2x thumb
Thanks Kevin.  I was talking collectively.  I will restate the situation for you.  I understand that there are something like 600,000 users of Reckon products.  If only 10% of them are using Payroll, we have 60,000 users.  If they are only inputting an annual salary of lets say just $50,000 (perhaps just 1 to 2 employees), then we have a wages bill of $3 trillion.  That equates, on that small scale, as representing an overpayment of $12 million across all of those employers, collectively.  I will let you do your own sums.  Just check with your own clients and see what the collective value is that they are inputting as an annual salary figure and you will find out what it is costing your own group on an annual basis.  Up for the challenge?
John L G  
Photo of Kevin Russell

Kevin Russell, Accredited Partner

  • 52,120 Points 50k badge 2x thumb
John no. Its an exercise that will cost many times more than it will save. Thank you solemnly for your intense interest.