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  1. AU Payroll - Include commission & bonuses calculation on Schedule 5

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    15 comments  ·  Payroll & expenses » Payroll  ·  Admin →
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    Accepted  ·  AdminDavid Reynolds (Admin, Xero) responded

    Hi everyone, thanks for your feedback on Schedule 5 calculations for commissions and bonuses. We appreciate you explaining how important this is for commission-based industries where commission is often the primary income.

    Currently Xero payroll requires regular earnings to calculate Schedule 5 tax. We understand the current setup requires manual workarounds when employees have commission-only income.

    Our product team has reviewed this idea and moved it to Accepted so it can be formally considered in future planning cycles. We'll keep you updated as things progress.

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    Sandie Royle commented  · 

    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."

    Sandie Royle supported this idea  ·