Bonus, Backpay and Commission (AUS)

This article is for Australian payroll users only

 

 

ATO specify three different rules that can be applied - SmoothPay uses Method A to make it easier to calculate the result yourself if you need to (desk-check).

 

The link to ATO's rules around this is here:

 

https://www.ato.gov.au/Rates/PAYG-withholding-2019-20/Schedule-5---Tax-table-for-back-payments-commissions-bonuses-and-similar-payments/

 

Generally we'd suggest you process the bonus/backpay/commission (BBC) in the employee's normal pay, however it's OK to do it off-cycle if you prefer - SmoothPay will refer to the employee's annual salary, or failing that the most recent normal pay.

 

Simply enter the amount as an allowance using the appropriately classified code (the Category used by the allowance is critical to getting the correct calculation: e.g. Bonus, Backpay or Commission (and there's two Backpay options))

 

The way it works is:

• take the employee's current pay (or ordinary pay if no current pay entries), ignoring the BBC, calculate the tax
• do the same calculation including the BBC, calculate the tax
• the difference is the amount of tax to be deducted for the BBC (limited to 47%)
• you can view the calculation details in Payrun..Summary, by hovering your mouse over the word "Tax"

You can also override the automatic tax calculation with your own (Payrun..Summary..Override tax).

 

*end*