Payroll - Deductions

Deductions are the amounts to be withheld from an employee's pay (other than tax withheld amounts).
There are different types of deductions as below:

• Non Reportable Deductions: an amount which is deducted from the employee's pay post-tax. This type of deduction is not reported to the ATO and only appears on the employee's pay slip, the amount is deducted from the Net payment.
• Non Reportable Deductions
• Personal Super Contributions

After-tax (non-concessional) contributions are deducted from the employee's net payment after the tax has been deducted

• Reportable Deductions: separately itemised for the reporting purpose, the following is a list of deduction categories:
• Child Support Deduction

Where the Registrar has given written notice to a payer to deduct a specified amount from a payee, payers are obliged to withhold money from payees and pay it to the Registrar. Where there is no written notice from the registrar, the child support deduction should not be used, instead use the Non Reportable Deductions and add the required description.

• Child Support Garnishee
• Salary Sacrifice Super (Mandated)

Mandatory pre-tax contribution to a superannuation fund that requires members to contribute in this way, there is no payee influence over the amount of payer contributions to super, this type of super is not a Reportable Employer Superannuation Contribution (RESC).

• Salary Sacrifice Super (Voluntary)

An effective salary sacrifice arrangement for super contributions to a complying super fund that was voluntarily agreed by the payee, this type of super is also reported as Reportable Employer Superannuation Contribution (RESC).

• Salary Sacrifice (Other Benefits)
• Union Fees
• Workplace Giving

Salary sacrifice Super(Voluntary & Mandated) and Salary sacrifice (other benefits) are pre-tax deductions, all other deductions are post-tax deductions.

Salary Sacrifice Deduction

An effective salary sacrifice arrangement is one where the approved agreement between employer and employee is in place before the payments to be sacrificed have been accrued, earned or are payable.
Payments that may be sacrificed are defined below:

• Salary, wages, commission, bonuses or allowances paid to an individual as an employee
• Remuneration of company directors
• Salary, wages, etc. paid to certain office holders
• Lump Sum W Payment (return to work payments)

There are some payments that cannot be sacrificed:

• CDEP – as this is an Australian Government payment to qualifying payees
• Lump Sum Payments – other than lump sum W (return to work payments)
• ETPs – regardless of which type of ETP code

Whilst payments may be sacrificed to a complying superannuation fund, other employee benefits may include:

• Fringe benefits – such as cars, property (goods, land, buildings, shares and bonds) and expense payments (loans, school fees, childcare costs and home phone costs)
• Exempt benefits – work-related items such as portable electronic devices and equipment

Setting up Deduction

A deduction might be deducted on every pay run for an employee, to ensure the required deduction is included on every pay, you need to setup the required deduction item under the employee's payroll details.
This guide will show you how to setup deductions for an employee:

1. Access the employee's details
2. Click Payroll Details tab
3. In the Deduction section, select the deduction type
4. Enter the deduction description (optional) if required

The optional description is used when printing an employee's pay slip, a dedicated deduction code will be used when reporting to the ATO.

5. Enter the deduction amounts
6. Pre-Tax this option is determined by the system based on the selected deduction type

Recording the Deduction

Deduction can be set at the time of processing the employee's pay, each deduction represented by a fixed amount.
This guide will show you how to process a deduction when generating a pay run:

1. Access the employee's pay run
2. In the Deduction section, select the deduction type
3. Enter the deduction description (optional) if required

The optional description is used when printing an employee's pay slip, a dedicated deduction code will be used when reporting to the ATO.

4. Enter the deduction amounts
5. Pre-Tax this option is determined by the system based on the selected deduction type

Reporting the Deduction

Any deduction added in the deduction section are automatically configured when reporting to the ATO or generating a payment summary. Non-Reportable deductions are excluded and will not be reported to the ATO, Non-Reportable deductions will only appear when printing a payment slip.