Entering back payments, commissions, bonuses and similar payments

When paying employees back payments, commissions, bonuses and similar payments, the tax needs to be calculated based on the method used. The ATO has provided several methods to calculate this tax: Method A, and Method B(i) and Method B(ii) and Return to Work.

Reckon Payroll allows you to select the relevant calculation method, to ensure the values are reported correctly to the ATO and displays a Lump Sum PAYG section for you to manually enter in the tax value.

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), Additional payment method B(ii) or Return to Work. 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), Additional payment method B(ii) or Return to Work and is part of an employee's pay run, a PAYG tax item Lump sums will display 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. Select Done

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

To enter the lump sum tax amounts:

  1. Select the Lump sums tax item in the PAYG Tax section
  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
  4. Select Done
  5. Repeat for all other Tax components
If you are using a pay item that has the calculation method of Additional payment method B(ii), the Financial year is a required field and can be selected from the drop down list.

Need help on creating pay items to be used for back payments, commissions, bonuses and similar payments ? Select Configuring Pay items for Back Payments, Commissions, Bonuses and similar payments.


Need more help?

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

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

How did we do?

Paying a Reimbursement - Reckon Payroll

Processing a termination pay

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Managing Pay items for Back Payments, Commissions, Bonuses and similar payments
Pay an employee Back Payments, Commissions, Bonuses and similar payments
Payments (Make Payment)
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