How to setup Salary Packaging in Payroll Premier

Legacy KB ID: 3847

Question

How do I setup Salary Packaging in Payroll Premier so that tax is calculated on the cash component only, Super is calculated on the total package and the Payment Summary shows all components in the correct places?

Answer

The key to getting the correct result is that non-super salary sacrifice deductions are setup correctly. 

Consider this example:

·         Salary Package is $100,000 and paid weekly

·         Super Salary Sacrifice is $200.00pw

·         Car Lease is $100.00pw

·         Other allowable deduction is $50.00pw

·         The remainder is the cash component.

 

Setup the Salary Sacrifice Deduction:

1.    Lists > Deductions

2.    Deductions button > New > enter a name:  eg, Car Lease

3.    Click on Options tab

4.    Tick Tax Exempt Deduction

5.    Tick Reduce Gross Payments on INB Payment Summary

6.    Set Deduction Type to Regular.    Click OK.

8.    Repeat these steps for all non-super salary sacrifice deductions.

 

Setup the Employee file:

1.    In Pay Rates tab, use Normal Hours pay rate for the full amount of the Salary package and select Yes for Super and apply the appropriate rate (normally 9%);

2.    In Deductions tab, add the salary sacrifice Deductions ensuring that Ex Tax is Yes and Deduction Type is Regular. 

3.    In Super tab, add the Salary Sacrifice as the Contribution Type, add details, select amount and the $ or % symbol (in this example, $).

 

You are now ready to process the pay.

 

When you process one pay and examine the Payment Summary you will see that:

1.    the Gross Amount has been adjusted to show the cash component;

2.    Salary Sacrifice will appear in the RESC field

3.    There will be entries for each Deduction

4.    Tax will be correctly calculated on just the cash component.


When you view the Update Pay For.... screen for the particular pay, you will see that the Wages box will show Salary Package amount minus Salary Sacrifice amount only.  


Additional Note
If you set the Salary Sacrifice Deduction as a Professional Org, it will appear in the Deduction section of the Payment Summary.  When you examine the Print Reconciliation Report you will see that all deductions with the type Professional Org will appear in the Union column.  However, they do not appear under the Union tag on the Payment Summary.

 
Check the correct tax amount for the cash component with the ATO's tax calculator at:  https://www.ato.gov.au/scripts/taxcalc/calc_standard_hire.asp

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