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Tax on Additional Payments Method A

Owned by michaella_Datacom
Sept 29, 2021
2 min read

The system will do the following when determining the gross taxable earnings for Additional PAYG (like for Bonus, Commissions). In this order system will check

  1. Calculates an average gross earnings per pay period using average YTD earnings including current pay period.
  2. If the average YTD earnings is zero, system will use previous pay periods gross taxable earnings including current pay period.
  3. If this step 2 also gives a zero result, system will use the current pay periods gross taxable earnings

The system will do the following when determining the gross taxable earnings for Marginal Rate PAYG (like AL termination payment). In this order system will check

  1. Calculates an average gross earnings per pay period using average YTD earnings excluding current pay period including current pay period.
  2. If the average YTD earnings is zero, system will use previous pay periods gross taxable earnings including current pay period.
  3. If this step 2 also gives a zero result, system will use the current pay periods gross taxable earnings

Example 1 Average YTD earnings

Main - July                   9069.05
Main - August              9069.05
Main - September        9341.12
Manual - September    5000.12
Main - October            9341.12

Average earnings = $10455.115 (41820.46/4). This figure is used to add additional payment per pay period to work out difference in PAYG. System will only divide by the main pay packets when trying to determine the 'normal pay'.

Example 2 Previous FY earnings

Main - June                9069.05
Main - July                 9341.12

Previous FY earnings = $9069.05. 

Example 3 Current earnings

July                             9341.12

Current earnings = 9341.12 month of July. In the event you have zero current earnings then there is no way for the application to determine how much the client ‘normal pay is’ therefore it will withhold zero dollar from employee earnings. So manual calculation is required best left for client to advise as they are aware of historical data.

Note: The sum of YTD earnings does not include other additional payments. i.e if back pay was paid in tax year, this amount in not included in the sum for averaging the YTD earnings. 


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