Handling PAYG when there is an additional pay in a year

Legacy KB ID: 3769

Question

This year our company will make an additional pay.  What can I do to ensure that withhold the correct amounts of PAYG from our employees throughout the year?

Answer

It is possible for a year to have an additional pay because of the timing of pay days – that is, there may be 53 weekly pays or 27 fortnightly pays.  The ATO withholding tax tables are calculated on a normal number of pays in a year, so the extra pay can lead to employees not paying the full amount of PAYG throughout the year so that they have a tax liability at the end of the financial year. 

Solution

Users should refer to the ATO’s website on the issue:

https://www.ato.gov.au/businesses/content.asp?doc=/content/45335.htm

To increase the amount of PAYG withheld:

1.    Open the Employee record;

2.    Change tabs to Payroll and Compensation Info and click on Taxes button;

3.    Under the Federal tab go to the Extra Tax box;

4.    Enter the amount suggested by the ATO and click OK.

Enter a diary note to remove the extra tax after the last pay of the financial year.  You can enter the note in the To Do List under Company on the top menu line.