When a pay run is marked as Paid, the system will capture and store the relevant pay data in the background. This data will be used to calculate the Payroll Tax amounts and allocate this to the relevant Payable States when you run the Payroll Tax Report.
Each payroll record is considered against:
- whether the Pay Item, Job, Customer, Supplier and Entity are set to Payroll Tax Exempt or Payroll Tax Liable;
- Whether the employee has already been paid within the same calendar month;
- Whether the employee has been paid in the same or different states for pay runs within the same calendar month.
Set the Payable State for Payroll Tax
The Payable State assigned to a payroll record is determined as follows:
- If an employee works in a single state during the month, the Workplace State on the Job will be considered the Payable State.
- If an employee works in multiple states throughout the month, the Payable State will be determined by where the employee lives.
- If this is not available (or is not in Australia), then the Payable State will be the state listed in the Payroll Entity’s Payroll Address.
Update the Payable State
As the Payroll Tax Report captures data after each pay run is Paid, the Payable State is a dynamic value based on the above considerations.
This means that if you run the report multiple times during a period, the Payable State may change as more data is made available.
For example, an employee lives in NSW and works in multiple states.
- In Week 1 of a calendar month, they work in VIC only. The Payroll Tax Report will attribute any liability amounts to VIC as the Payable State.
- In Week 2 of the same month, the employee works in NSW. According to the above hierarchy, the employee’s Address state is now used. In Week 2, the Payroll Tax Report will update the Payable State to NSW for both Week 1 and 2.
Note that the Workplace State for each of the above amounts will still be recorded as the state where the Job is located.
How are Exempt Pay Items Treated by the Report?
If the exemption settings for a Pay Item is changed after a pay run is marked as Paid, this will not update any historical data within the period.
- In Week 1, a pay item ‘Base Hourly’ is marked as Payroll Tax exempt, so pay data for that item is not included in Payroll Tax calculations.
- In Week 2, the settings for ‘Base Hourly’ are changed so that it is liable for Payroll Tax, then a second pay run is posted. The report will include all pay data from the Week 2 pay run will be included in the Payroll Tax Calculations. Data from Week 1 will still be excluded.
Correcting Payroll Tax Settings in a Pay Run
You will need to reverse any amounts paid under the incorrect Payroll Tax settings using a lump sum pay.
When reversing the original pay, you’ll need to ensure that each pay item used is configured the same way that it was when the original pay was processed, as this will reverse the misattributed data.
Once the amounts have been reversed, update the exemption settings as needed and process another lump sum pay to record the data correctly.