Staff Deductions - Is this correct?

Stephanie_10324139
Stephanie_10324139 Member Posts: 8
Hi,
I am just wanting to check I have done this staff deduction correctly after reading a few old posts about it. 

I entered the invoice under my supplier (we bought tyres for a staff member), I created an asset account for this staff members purchase (will do seperate one for each employee if necessary to keep track easier). In my invoice, I linked it to that asset account. I created a payroll deduction which is also linked to that asset account. $50 per week gets taken from his pay to pay this amount back. Seems to be working correctly. The invoice itself has been paid out of our business chq account already, does this effect anything at all?

Thanks everyone :)


Comments

  • Sheryl_10313093
    Sheryl_10313093 Member Posts: 57
    edited July 2020
    I am very interested in understanding this process

  • John Graetz
    John Graetz Member Posts: 1,651 ✭✭✭
    edited November 2019
    Hi Stephanie.  That is pretty well the way that I do it.  The only thing that you need to be careful of though is the GST aspect.  If you have claimed back the GST on the purchase of the tyres for the staff member, you will also need to account for the GST in the amount that is being repaid.  The easier way to do it is not claim the GST on the purchase, because it is not a company expense as such, and then you would deduct the gross amount of the cost from the employee's pay without then having to account for any GST.  The other thing that you might have to be careful about, by having this repaid in instalments, is the possibility that the transaction might be considered to be subject to Fringe Benefits Tax rules (a loan benefit).
    John L G 
  • John Graetz
    John Graetz Member Posts: 1,651 ✭✭✭
    edited November 2019
    Stephanie.  Just to clarify what I said.  I note that you are claiming back the GST on the purchase, but only charging the staff member the ex-GST price, therefore both you and the staff member are obtaining a benefit to which you are not entitled, as such.  By you claiming back the GST on the purchase, you should be deducting an amount of $55 from the staff member, which would include GST of $5.  As mentioned earlier, the easier way that I find to do this would be not to claim back the GST on the purchase, but still deduct $55 from the staff member which would under this scenario not have to have GST deducted.
    John L G  
  • Linda ABC
    Linda ABC Accredited Partner Posts: 1,131 Accredited Partner Accredited Partner
    edited November 2019
    In addition to John's comments - be very careful that this is clearly documented, signed by yourself and the employee and that this deduction from his pay is at the employees request and benefits the employee - refer to such links freely found on the internet like these: 

    https://www.hunthunt.com.au/services/employment-and-workplace-relations/deductions-from-wages-or-sal...

    https://www.codea.com.au/sub-publication/deductions-from-wages-a-risky-business/

    https://employsure.com.au/guides/wage-and-pay/deducting-pay-and-overpayments/
  • Stephanie_10324139
    Stephanie_10324139 Member Posts: 8
    edited July 2020
    Thanks guys, that makes a lot of sense, and I understand the risks involved but its all sorted between the staff member and us :).

    John, In regards to the GST component, the bill in question has already been processed through BAS. Should I change it and re do the BAS?  Or just go with the GST included option? I would like to do the GST free option as that sounds like the right way.

    Thanks heaps again!
    Stephanie
  • John Graetz
    John Graetz Member Posts: 1,651 ✭✭✭
    edited November 2019
    Hi Stephanie.  I would be inclined to not do a revised BAS.  The reason is pretty simple.  No matter which way you look at it, the employee is required to repay $55, not $50.  Had you not claimed back the GST, then the employee would have had to pay back $55 which would not have attracted GST.  Because you have claimed back the GST, you must still charge the employee $55, but now, $5 of that will include GST.  The end result will the be neutral, i.e. you have claimed back GST of $5 and now you will have to pay the ATO $5.  As previously stated, the employer was not entitled to claim back GST because it was not their cost, but rather the cost for a third party.  Consequently, the employee is not entitled to have the cost reduced by the value of the GST, because they are not registered for GST.
    John L G