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AU Payroll - Tax commissions paid using regular tax table

This is not an idea; it is a requirement, Xero.
At present, all pay types classified as commissions are being taxed as follows: "The method for Schedule 5 in Xero, calculates the PAYG withholding amount by averaging all additional payments made in the current financial year, over the number of pay periods in a financial year, and applying that to the average total earnings to date".

If commissions are paid every month, they should not be taxed in this manner, as per this ATO web page which says "Do not use this schedule for payments for a single pay period".

https://www.ato.gov.au/rates/schedule-5---tax-table-for-back-payments,-commissions,-bonuses-and-similar-payments/?page=2

Xero needs an additional py type for monthly commissions.

"If the commission, bonus or similar payment relates to work your employee performed in a single pay period (for example, a week, a fortnight or a month) the amount is added to all their other earnings for the current period. Withholding is then calculated using the standard PAYG withholding tax tables."

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Sandie Royle shared this idea  ·   ·  Report…  ·  Admin →
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  • Cassandra Burr commented  ·   ·  Report

    I have a client with a weekly incentive that needs to go through as Bonus and Commission, and needs to use the regular PAYG tables. The work around of 'manually adjust the tax' is not really appropriate, as it's a large payroll and already takes a substantial amount of time to process without this extra step.

  • James Gorrie commented  ·   ·  Report

    I agree with this - Xero needs to have an option to report pay items as 'Bonuses and Commissions' through STP but still calculate PAYG using the standard calculations

  • Lara Crowdey commented  ·   ·  Report

    This is critical. An earnings category for commission paid within a single pay period that attaches to the standard PAYG Withholding tables is a must for basic tax compliance. Manually calculating this to override Xero's calculation every week is time consuming and costly to our business. This is a basic payroll matter that should be addressed asap.

  • Sonia Partridge commented  ·   ·  Report

    Hi Xero

    Tax commissions paid using the regular PAYG tax table is extremely critical for my business when completing weekly payruns.

    I have 20 employees that receive bonuses and commissions of different amounts each week and currently I need to complete a manual adjustment for each and every employee!

    Under the ATO ruling, if Bonuses and commissions are paid on a weekly basis, as they are with our business, then they need to be taxed using PAYG tables, not Schedule 5.

    By having to manual adjust each pay each and every week is extremely time consuming and extremely frustrating.

    Is it possible when setting up our bonuses and commissions under STP2 that we have a choice (box to tick) of whether they are to be taxed using PAYG method or Schedule 5?

    It would be very much appreciated if you can find a solution for this issue asap.

  • Suzi Silvester commented  ·   ·  Report

    Hi Xero,

    This is absolutely critical. I have a client that pays bonus's and commissions to 20+ employees every week and doing manual tax adjustment is extremely time consuming. As these bonuses and commissions related to a single pay period tax needs to be calculated using the standard PAYG withholding tax table as per ATO ruling.

    When you add a bonus and commission pay category in Xero can we please have an option there to select the standard PAYG withholding tax table OR schedule 5.

  • Christine Marshall commented  ·   ·  Report

    Hi Xero. Could you please treat this as an urgent compliance requirement? Up until STP2 Xero have made my payrolls easy compared with some other software. Since STP2 I have had this significant compliance issue. It is not ideal to have to manually change the tax on commission only employees every pay run. I provide bookkeeping services to dental practices where this is a common situation. Looking forward to a solution.

  • Suzanne Jewry commented  ·   ·  Report

    I tolerated having to amend PAYG WH every pay with the hope that the problem would be resolved but the problem continues. I know that others have complained about this multiple times in the Xero Bookkeepers Facebook Group.
    We need this changed so that employees that receive commission for a single pay period can be taxed at regular rates rather than Schedule 5 as per ATO advice.

  • Freya Pieroz commented  ·   ·  Report

    Clarification: you're asking for the ability to tax commissions paid every pay period using the regular tax table instead of table 5. They still need to be reported as commissions under STP2, so they can't be reported as an ordinary hours pay item.

    That is: if an employee is paid their regular pay monthly, and received commissions relating only to that month, then it is currently being taxed as if they were being paid their regular pay weekly with commissions paid monthly, which is not as per ATO guidelines and therefore can potentially lead to withholding the incorrect amount of tax.