Manual Calculations includes a Bonus Tax Calculator to tax payments over the period in which they are earned, e.g. bonus, commission, etc. When the payment was earned over a period that differs from the employee’s regular pay frequency, the tax must be calculated at the employee’s marginal rate.
Marginal tax is calculated by comparing an employee’s actual earnings and tax within a defined period to what their earnings and tax would have been had the payment been paid as it was earned over the period instead of paid as a lump sum. E.g.:
Bonus or commission payments earned over a quarter or year are paid as a lump sum using an Amount type Addition Before Tax.
Manual Calculation transaction calculates the marginal tax.
The tax will be calculated, including any STSL (Study and Training Support Loans), using Method Bii and the total Tax withheld will be limited to 47%. This is as per the ATO. For more information, refer to Work out the Withholding Amount on the ATO link below:
To bulk process bonus and commission payments, use the Calculation Worksheet. For more information, see Calculation Worksheet.
To pay a Bonus or Commission and calculate marginal tax:
Go to Payroll, Transactions, Processing, Manual Calculation.
Select the Employee.
Click the Add radio button.
Tick Generate EFT to include the Net Pay in the EFT file.
Tick Superannuation from the Pay Calculation dropdown to calculate Super on the Bonus or Commission. Note: To include the Super Earnings in the SGL Quarterly Cap you must tick Superannuation.
Select Adds Before Tax.
Click Add and select the bonus or commission addition.
Enter the Value.
Click Bonus Calc in the bottom right-hand corner to open the Bonus Tax Calculator.
Average Normal Earnings is populated based on previous earnings. This value is used to calculate marginal tax and can be changed if required.
Enter the Number of Periods over which the bonus or commission was earned. For example, to pay a weekly employee a quarterly bonus, the number of periods would be: 52 weeks / 4 quarters = 13 weeks (periods).
Click Calculate Tax to calculate the Tax Withheld.
Click OK to accept the values.
Then click Process to save the transaction.