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15 votes
Thanks for sharing your idea about adding the Medicare levy to AU payroll tax calculations.
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Brittany Swash
commented
I agree, to allow an employer to manually input a variation is crazy. Especially where the system doesn't take into account differences in pay, eg leave loading or lwop and you then need to manually work out each and everytime you are processing payroll.
Brittany Swash
supported this idea
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This is crazy that this functionality is still not available in Xero Payroll when it is specifically provided for under the Taxation Administration (Withholding Schedules) Instrument 2025.
The Instrument doesn't merely acknowledge Medicare levy variations — it specifically states:
“Where employees have answered yes to question 12, the software must be able to store the number of dependants shown at this question on the declaration.”
Yet Xero Payroll currently provides no field for an employer to enter the number of dependants from an employee's Medicare levy variation declaration.
This leaves employers having to manually calculate and override PAYG withholding every pay cycle for an entirely standard ATO declaration. That introduces an unnecessary risk of payroll errors and places the compliance burden back on employers using payroll software specifically to avoid manual tax calculations.
This isn't an obscure or discretionary payroll feature. The withholding schedules are made under the Taxation Administration Act 1953, and the Instrument provides the formulas and procedures for calculating the amounts employers are required to withhold.
I have attached the Taxation Administration (Withholding Schedules) Instrument 2025 for reference. I would strongly encourage Xero to treat this as a compliance functionality issue rather than simply a product feature request.