Adjust Pays Processed Using the Incorrect Tax Treatment

Overview

If the incorrect tax settings have been applied to a processed pay for an employee, you will need to reverse the incorrectly processed amount in one lump sum pay, then create a second lump sum pay to process the employee's pay using their correct tax settings. 

A common scenario for this is when an employee is assigned the Working Holiday Maker tax table but shouldn't have been.

It's important to ensure that the employee's original (ie incorrect) tax settings are still selected in their profile when you create the lump sum pay reversal. 

Reverse the Pay with the Incorrect Tax Settings Assigned

If an employee has been paid using the wrong tax table, you can process the adjustment by following the steps below:

1. Go to Users > Employees > select the employee > Tax & Super > ensure that the incorrect tax table is set in the Tax Table drop-down > Save. This should be set as the tax table which was used in the original pay run.

2. Go to Payroll > Process Payroll > Process Payroll > select the Pay Cycle or set the Report Settings criteria > Add Lump Sum Pay.

3. Complete the fields with the relevant information for the first pay item you need to add, then click Save.

4. Expand the employee pay in the Process Payroll report.

   • If needed, tick the checkbox to the left > click 'Create Pay Run' field > Recalculate Selected > choose the required Pay Date > Apply 

5. Add any additional items to the pay by clicking '+Add Pay Record...'. Ensure that you are using the exact items that were used when the amounts were originally processed in the incorrect pay.

6. Enter the Units for each item as a negative value to reverse out what was paid to the employee under the incorrect tax table. You may need to manually overwrite the tax amount to match what was taxed in the original pay.

7. Ensure the negative values will not take the employee’s YTD earnings into negative.

If the employee was undertaxed, this process will create a recoverable deduction which will need to be added to a pay run and processed through to a Paid status.

Reprocess the Pay With the Correct Tax Settings Assigned

Once the reversal has been processed, follow the steps below to process the pay using the correct tax table:

1. Go to Users > Employees > select the employee > Tax & Super > select the correct tax table from the Tax Table drop-down > Save. This should now be the correct tax table.

2. Go to Payroll > Process Payroll > Process Payroll > select the Pay Cycle or set the Report Settings criteria > Add Lump Sum Pay.

3. Complete the fields, ensuring the Start and End dates match the original pay period, then click Save.

4. Expand the employee pay in the Process Payroll report.

   • If needed, tick the checkbox to the left > click 'Create Pay Run' field > Recalculate Selected > choose the required Pay Date > Apply 
5. If a Recoverable Deduction was generated in the reversal, click 'Add Adjustment' against the Recovery Amount in the yellow highlighted section to apply it to the pay.

6. Add any additional items to the pay by clicking '+Add Pay Record...'.

7. Enter the Units for each item as a positive number to offset the amount reversed in the previous pay run.

8. Check that the values offset the figures that were adjusted in the negative pay run. The total of the positive pay run should balance the total of the negative pay run. You’ll need to check the tax amount that calculates and overwrite this field in line with the correct tax table, if necessary.

9. Once the amounts are confirmed, select the employee pay and add it to an existing pay run or create a new pay run.