To add a Pay Item:
- Go to Config > Payroll > Pay Items > click ‘Add New Pay Item’.
- Select ‘Australia’ as the Region > Create New Pay Item. This popup window won’t appear if you only have one region enabled in your portal.
- Enter the relevant details.
- Click Save.
Refer to the table below for more information on the settings you will need to configure.
|The name of the pay item as it will appear on pay advices and invoices.
|Optional description of what the pay item will be used for
|Pay Item Type
- Used for standard pay items (eg Daily, OTx1.5)
- Requires you set the Pay Basis as:
- ‘Pay based on time worked’; or,
- ‘Pay one unit’ (eg one-off bonus or commission payment)
- A set amount that is paid to an employee as an allowance (eg meal allowance, travel allowance)
- Pay Basis does not appear for this item type
Piecework (if enabled)
- An amount paid to an employee where the units vary per pay (eg kilometres for travel)
- Requires you to set the Unit name and indicate if it is a ‘Car allowance’.
- An optional Allowance Maximum can be set. The value entered in this field is the maximum value that can be entered in a timesheet.
- Note: This field does not track usage across pay periods; it is a maximum value that cannot be exceeded on a per timesheet basis. If you need to track usage (eg mileage to a certain limit), this will need to be done manually.
- Used where employees aren’t paid under a traditional pay arrangement (eg paid per fix/installation/item)
- Requires you to set the Unit name (eg Necklaces)
|Determines how the base pay and charge rates for an employee are calculated
- If the rate is the same as the base pay, enter 1.00
- If you’re using Rate Cards, use 1.00 as the multiplier
- If the rate is higher than the base pay, enter the decimal (eg for OTx1.5, enter 1.50)
|Backpay Pay Item
The pay item that is used if a pay impact is applied from the Impact Report - Rate Change and a backpay is created in Process Payroll.
A pay item that has been specifically configured to your requirements can be nominated here and will apply automatically when the backpay is generated.
By default, this will be set as --This Pay Item-- and will use the original pay item in the backpay.
|Indicates if the item (and any units recorded against the item) is included in the calculation of superannuation
|Apply Super to
|Determines whether superannuation is calculated against an employee’s Gross or Base earnings (eg Annual Leave can be set up with a multiplier of 1.175 and have super applied to the Base amount only). Will show if the ‘Super Exempt’ checkbox is not ticked.
|Indicates if the item (and any units recorded against the item) is included in the calculation of PAYG tax
|Workplace Insurance Exempt
|Indicates if the item (and any units recorded against the item) is included in the calculation of Workplace Insurance
|Payroll Tax Exempt
|Indicates if the item (and any units recorded against the item) is included in the calculation of Payroll Tax.
|Tax Applicable to Suppliers
|The default Invoice Tax that will be applied to Suppliers for this pay item.
|Leave Accrual Exempt
|Indicates if leave entitlement should accrue against the item
|Visibility to Employees
|Indicates whether the pay item will be visible to employees if the value is zero.
|Payment Summary Settings
These settings relate to how data was previously reported through STP v1. They are no longer included as part of your STP messages, and the associated fields are locked once the pay item has been used in payroll.
|STP Reporting Settings
Specifies how data will be categorised by the ATO when the deduction item is included in an STP submission.
Pay Items can be categorised as:
- Not Applicable
- Gross Amount
- Reportable Super
- Paid Leave
- Total Allowances
- Bonuses and Commissions
- Directors Fees
- Lump Sum
- Salary Sacrifice
Some categories will require you to make further selections to determine how the pay item should be reported for STP. For more information on this, please see the STP Reporting Settings section below.
This section has been introduced ahead of changes to STP reporting requirements. Some of the selections in the STP Reporting Settings will not be included in your STP submissions until these changes come into effect upon the release of STP Phase 2.0.
Important: The STP Report Settings fields for a pay item will lock once that pay item is included in a pay run that has a Pay Date on or after 1 July 2021 and is marked as Paid.
|Tax applicable on invoices
|The Invoice Tax that will be applied when the pay item is linked to an invoice
|The currency that the pay item will be invoiced in when the pay item is used as a Charge Item and multi-currency has been enabled in a portal. Will default to the region set for the pay item
|Invoice Item Type
|A report setting that identifies where the item has originated. Can be set as Timesheet, Expense, Other or any custom Invoice Item Types that have been set up
|Cost of Goods
|Sets the actual cost of an item (eg medical checks) and the method to calculate the Cost of Goods (Cost per unit or Percentage of Net)
|GL Export Details
|The GL Income Account and GL Expense Account codes against which the item will be allocated when it is used in a pay.
STP Reporting Settings
The STP Reporting Settings section is used to categorise pay items so that amounts recorded in a pay using these items are reported correctly to the ATO through STP.
The settings that you select here relate to upcoming changes made by the ATO to STP reporting requirements, which will come into effect in the 2021/22 financial year. Until these changes are implemented officially by the ATO, this data will not be included in your STP submissions.
Depending on which category you select in the STP Reporting Settings drop-down, you may be required to make additional selections so that your STP data is reported correctly to the ATO.
You can review the current STP Reporting Settings for your pay items by exporting the Pay Item Detailed Export .csv.
Whilst the traditional 'Gross Payments' has been disaggregated as part of STP Phase 2.0 into items such as paid leave, allowances, overtime, etc, there are still a range of payments that may be included in gross, such as:
- Ordinary Hours
- Casual Loading
- Shift Penalties (where an employee is paid penalty rates for working the ordinary span of hours. This does not include overtime)
- Travel Time
- Training Time/TAFE hours
- Piece Rates
- Breach of rest break (Even though this is paid at overtime rates, it should be reported as gross. This may mean you need to set up separate pay items for overtime rates paid for breaks not taken)
- Workers Comp (Return to Work) where the employee is at work performing duties
When a pay item is created that is set with a Payment Section of Paid Leave, you will need to select a Leave Type from the following options:
- Leave entitlements that are cashed out in lieu of taking the leave
- Cash Payout leave types include:
- Annual Leave
- Leave Loading
- Long Service Leave
- Personal Leave
- Rostered Day Off (cash out of accrued RDOs in lieu of taking a day off)
Unused Leave on Termination
- Leave that is paid out on termination including Annual Leave, Long Service Leave, as well as ETPs such as RDO, TOIL and Personal Leave that may be payable on termination
Paid Parental Leave
- Salary and wages paid to an employee during paid parental leave (Employer)
- Government Paid Parental Leave
Workers Compensation Leave
- Any Workers Compensation payments received by an employee for the hours not worked
- This does not mean you need to set up a leave category for Workers Compensation (Not Worked). You can just categorise the pay item used to pay Workers Compensation separately.
Ancillary and Defence Leave
- Paid leave for absences, eg Australian Defence Force, Emergency Leave, Eligible Community Service, Jury Duty
Other paid Leave
- All other paid absences, eg:
- Annual Leave
- Leave Loading
- Long Service Leave
- Personal Leave
- Rostered Day Off (RDO)
- Time Off in Lieu (TOIL)
- Compassionate and Bereavement Leave
- Study Leave
- Family and Domestic Violence Leave
- Special Paid Leave
- As per SGR 2009/2 S32, 33, part of S68 (paid workers’ compensation for work performed or attendance at work).
When a pay item is created that is set with a Payment Section of Total Allowances, you will need to select an Allowance Type from the following options:
- A set rate for each kilometre travelled for business that represents the vehicle running costs, including:
- depreciation into account
- Should not include any cents per kilometre allowances that are paid for travel between the payee’s home and place of work unless it is a home-based business and the trip was for business purposes
- As defined in s900-220 ITAA 1997, it is an allowance:
- included in an award in force on 29 October 1986
- paid under an award that can be traced back to the 1986 award
- paid to cover transport expenses – these being the actual transport costs and not meals, accommodation or incidentals
- Refers to a fixed dollar amount per unit of time (such as per day, per week) to cover the cost of transport. This allowance is similar to c/km, except that the award transport payment measures time (per day or week) rather than distance travelled (per km) for the c/km allowance. It is an average measure of the cost over time.
- An allowance for washing, drying and/or ironing uniforms required for performing work or services.
- Typically paid as a regular rate for each week of work or services performed and cannot include dry cleaning expenses or reimbursements
- An allowance defined in an industrial award or EBA that is in excess of the ATO reasonable allowances amount, paid to compensate the payee for meal breaks connected with overtime worked
- An allowance that is in excess of the ATO reasonable allowances amount (for domestic travel), paid to compensate payees who are required to be absent overnight from their ordinary place of residence
- Not a reimbursement of actual expenses, but a reasonable estimate to cover costs including meals, accommodation and incidental expenses
- All overseas accommodation allowances are to be reported, without reference to ATO reasonable allowance amounts
- Allowances to compensate a payee that is required to provide their own tools or equipment to perform work or services for the payer.
- This allowance was formerly required to be reported under “Other Allowances” with a description of the allowance type but is now required to be reported separately
- Any allowance that is paid to a payee to compensate for specific tasks or activities performed that involve additional responsibilities, inconvenience or efforts above the base rate of pay.
- Examples of tasks include:
- higher duties allowance
- confined spaces allowance
- dirty work
- height money
- first aid
- removing dead animals
- working in rain
- This allowances were formerly included in the aggregated gross amount but is now required to be reported separately
- Any allowance that is paid for to cover registration fees or maintain a recognised and authorised skill or qualification that is evidenced by a certificate, licence or similar
- For example:
- first aid allowance (to pay for the qualification rather than being on standby to provide first aid in the workplace as in Tasks)
- electrician’s licence allowance
- dual certificate allowance
- firefighting allowance
- liquor licence
- Any allowances that are not otherwise separately itemised within the pay event that are intended to compensate the payee for an estimated expense but may not include actual reimbursement of expenses.
- Examples of other allowances may include car allowances (other than cents per kilometre).
Lump Sum pay items will need to be further defined by one of the below Lump Sum Types:
|Lump Sum A (R)
- Unused annual leave or annual leave loading, and the component of long service leave that accrued from 16.08.1978 that is paid out on termination only for genuine redundancy, invalidity or early retirement scheme reasons
|Lump Sum A (T)
- Unused annual leave or annual leave loading that accrued before 17.08.1993, and long service leave accrued between 16.08.1978 and 17.08.1993, that is paid out on termination for reasons other than genuine redundancy, invalidity or early retirement scheme reason
Lump Sum B
- 5% of the payment for long service leave that accrued prior to 16/08/1978 that is paid out on termination, no matter the reason.
- The remaining 95% of the LSL payment is not reportable or subject to PAYG
Lump Sum D
- Represents the tax-free amount of only a genuine redundancy payment or early retirement scheme payment, up to the limit, based on the payee’s years of service
Lump Sum E
- Represents the amount for back payment of remuneration that accrued more than 12 months before the date of payment and is greater than the lump sum E threshold amount
Return to Work Payment
- A return to work amount is paid to induce a person to resume work, for example, to end industrial action or to leave another employer. It does not matter how the payments are described or paid, or by whom they are paid.
- For example, an employee previously worked for IT Services Pty Ltd. Due to a shortage in IT personnel, IT Services Pty Ltd offered the employee a position if they would return to work for it. They were paid $18,000 to start work, in addition to their salary.
In reporting Overtime separately, the ATO is able to distinguish these payments from Ordinary Time Earnings (OTE).
Pay items which may be considered overtime include:
- Earnings which are not ordinary time earnings where an employee works extra time. This can include work done:
- Beyond their ordinary hours of work;
- Outside their agreed number of hours; or,
- Outside the spread of ordinary hours
Time Off in Lieu (TOIL)
- TOIL is paid time off during the ordinary span of hours instead of being paid overtime pay. This should be categorised as Other Paid Leave (as above).
- However, if employees do not take this absence, they may request that the accrued time be paid out at the overtime rate. The cash out of TOIL in service should be reported as Overtime.
- Also known as recall allowances
- When an employee has left the workplace or completed their ordinary time without a prearranged agreement to work overtime, but is called back to work overtime
- On call, standby or availability allowances to remain in readiness for a return to work
Commissions on Overtime
- Commissions that are wholly referable to overtime hours worked.
- Other commissions (ie referable to ordinary hours worked) should be reported as Bonuses and Commissions
Leave Loading in Lieu
- Leave loading that is referable to a notional loss of opportunity to work overtime
Identifiable Overtime component of Annualised Salary
- Annualised salary or wage amounts that have distinctly identifiable components within the outer limits that are expressly referable to overtime hours. This is only where the annualised salary is expressly stated as a sum of specific itemised components that includes an overtime component.
Hourly Driving Rates or Rates/km
- Excess of total ordinary hours per period, or the stipulated overtime rate for piece-rate awards that include hourly driving rates and rates per kilometre
- Payable in respect of overtime only
Part Time Additional Hours
- Payable in accordance with industrial instruments that stipulate those additional hours are paid at a penalty or overtime rate that do not accrue leave entitlements
Excess Travelling Time
- Payable at overtime rates for travel to an alternative place of work outside the ordinary span of hours
Bonuses and Commissions
Bonuses are usually made to an employee in recognition of performance or services and may not be related to a particular period of work performed.
Commissions are usually made to an employee is recognition or performance or services and may be calculated as a portion of the proceeds or volume of sales.
Again, the ATO will be using the itemised reporting of Bonuses and Commissions to determine minimum obligations for OTE as defined in SGR 2009/2 sections 23,28,29,66,71
Directors' fees include payments to the director of a company, or to a person who performs the duties of a director of the company.
Directors' fees may include payment to cover travelling costs, costs associated with attending meetings, and other expenses incurred in the position of a company director.
Salary Sacrifice pay items will need to be further defined by one of the below Salary Sacrifice Types:
- An effective salary sacrifice arrangement, entered into before the work is performed, where contributions are paid to a complying fund, where the sacrificed salary is permanently foregone.
- Considered to be an Additional Employer Contribution.
- For example, you may salary package an employee so they ‘Salary Sacrifice’ an extra 0.5% super, therefore you reduce their salary by 0.5% and add an additional 0.5% employer superannuation contribution. The new legislation means that you should be including that 0.5% in ordinary time earnings to calculate SGC.
Other Employee Benefits
- An effective salary sacrifice arrangement, entered into before the work is performed, for benefits other than for superannuation, where the sacrificed salary is permanently foregone (eg cars, property, school fees etc)
For more information on configuring salary sacrifice deduction items, please see this article.
Edit a Pay Item
To edit a Pay Item:
- Go to Config > Payroll > Pay Items.
- Click on the name of the Pay Item
- Edit the fields as required and click Save.
You will not be able to edit the Payment Section field for a Pay Item once the item has been used in a pay run.
Delete a Pay Item
To delete a Pay Item:
- Go to Config > Payroll > Pay Items.
- Tick the checkbox to the left of the Pay Item’s name.
- Click ‘With selected pay items’ > Delete.
Pay Items cannot be deleted if they are the Default item or have been used in payroll. You will receive an error if you try to delete an item that has been used in a pay run.