Occasionally, your cycle of weekly or fortnightly pays, may have a financial year that has 53 weeks or 27 fortnights instead of the “standard” 52 and 26 pays assumed in the rates in the PAYG Withholding Tax Tables. When this happens, there will be a shortfall in the PAYG withheld from the employees’ wages over the year. Review this article to setup extra tax in MicrOpay.
At the beginning of the financial year, when you know this will happen, employees should be made aware of the potential shortfall in tax before the first pay. Employees may advise in writing that they will voluntarily increase the tax taken from their pay each week or fortnight instead of receiving a possible bill from the ATO after they do their tax return for the year.
For employees who opt in for extra tax to be taken from their pay each period click on the link below and review the ATO’s recommendation on how to work out the value of the extra tax component
How to set up Extra Tax in MicrOpay
When you know there will be 53 weekly pays and/or 27 fortnightly pays it might be an idea to add a Message to your last pay advice in the previous financial year advising employees of this.
Add a message to the Pay Advice
To add a message to your Pay Advices go to Payroll | Reports | Transactions | Pay Advices and go to the Messages tab and add a short message that could be followed up by an email with more details.
Add Extra Tax to the employee Addition/Deductions screen
Go to Payroll | Maintenance | General | Additions and Deductions and check if you already have an Extra Tax code setup. If not select Add and create one. It is important to allocate Tax Adjustment as the Category.
On the STP Reporting Tab for STP Phase 1 the Payment Summary field needs to be set to Include Tax Paid and the STP Phase 2 reporting group should be PAYGW.
OK to save.
Add the Extra Tax code to the employee details
Go to Employee | Employees | Additions & Deductions
Select Add.
From the dropdown select the Extra Tax deduction that has been created.
Untick Default
Enter the value that the Employee has agreed to deduct as Extra Tax per pay period.
OK to save.
Remember to remove the Extra Tax code from the Employees Details before the first pay of the next financial year to stop the extra tax being deducted.