Pay an employee Back Payments, Commissions, Bonuses and similar payments

The withholding tax for Back Payments, Commissions, Bonuses and similar payments is 47%, calculated using one of the annualised methods provided by the ATO. Reckon Payroll app allows you to configure Pay Items so these payments are correctly reported to the ATO when submitting STP.

Configuring Earning items for Back Payments, Commissions, Bonuses and similar payments

Back Payments, Commissions, Bonuses and similar payments are configured as Pay items and need to have the correct Tax applicable rate selected for the payment to be correctly reported. The ATO Reporting the amounts you have paid website provides details on how these payments need to be reported so you can create the correct Pay item.

To configure Back Payments, Commissions, Bonuses and similar payments:

  1. Create a new Pay item (see Manage Earning items, Manage Allowance items, Manage Leave items for step by step instructions).
  2. The Pay type needs to be:
    1. Earning item Variable for Back Payments Lump sum E
    2. Earning item Bonuses and commissions for Commissions, Bonuses and similar payments
    3. Back payments that are not Lump sum E are reported under the relevant payment type (for example an Earning item or allowance)
  3. Select the correct Tax applicable for the payment:
    1. Additional payment method A Use this method for any additional payments made, regardless of the financial year the additional payment applies to. This includes all back payments, commissions, bonuses or similar payments.
    2. Additional payment method B(i) Use Method B(i) for any back payments applied to specific periods in the current financial year
    3. Additional payment method B(ii) Use Method B(ii) for either:
      1. back payments that relate to a prior financial year
      2. any additional payments (including commissions, bonuses or similar payments) that don’t relate to a single pay period, regardless of the financial year the additional payment applies to.

Paying Earning items for Back Payments, Commissions, Bonuses and similar payments

To pay Back Payments, Commissions, Bonuses and similar payments the Pay item needs to be included in a Pay run. This can be done by adding the item to an employee's pay details in a pay run, or having it as a part of the employee's pay setup.

Reckon Payroll does not calculate the tax withholding amount when a Pay item has Tax applicable set to Additional payment method A, Additional payment method B(i), or Additional payment method B(ii). You will be required to enter the additional tax withheld for these Pay items.

Enter the tax withheld for Earning items for Back Payments, Commissions, Bonuses and similar payments

When a Pay item which has Tax applicable set to Additional payment method A, Additional payment method B(i), or Additional payment method B(ii) and is part of an employee's pay details, a PAYG tax item Lump sums will be appear with a warning that the you need to enter the lump sum tax amount.


To enter the lump sum tax amount:

  1. Tap the Lump sums tax item
  2. Enter the Tax amount
    For information on how to calculate the tax to be withheld see ATO website Schedule 5 – Tax table for back payments, commissions, bonuses and similar payments
  3. Tap Done

If an employee has multiple Pay items with Tax applicable set to Additional payment method A, Additional payment method B(i), and/or Additional payment method B(ii) they will be grouped together in a single Lump sums Tax item.

To enter the lump sum tax amounts:

  1. Tap the Lump sums tax item
  2. Select a Tax component
  3. Enter the Tax amount
    For information on how to calculate the tax to be withheld see ATO website Schedule 5 – Tax table for back payments, commissions, bonuses and similar payments

  1. Tap Done
  2. Repeat for all other Tax components
  3. Tap Done

Need more help?

Ask the Reckon Community at: https://community.reckon.com/

Or Log a Support Ticket: https://www.reckon.com/au/support/

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