AU: Examples of Tax Calculation For Additional Payments Scenarios (Effective 1 July 2012) (Doc ID 1450373.1)

Last updated on JULY 14, 2016

Applies to:

Oracle HRMS (Australia) - Version 11.5.10.2 and later
Information in this document applies to any platform.

Goal

The purpose of this document is to provide 'Development worked through examples' where customers had doubts over tax calculations for additional payment which is effective from 1 July 2012.

The note will be updated with more examples where necessary.

It is hoped that the details will help customer with understanding the figures generated by the system.

 

Example 1 - Additional tax is more than the bonus awarded to the employee

Fortnightly payroll first two pay periods of new financial year

 

Period 1:

  • Taxable wages: 4,541.67
  • Bonus: 10,000

 

Average Earnings Tax

  • 4541.67/1 = 4541.67
  • Tax on 4541.67 = 1292.00
  • Tax on normal earnings = 1292.00

 

Additional Earnings Tax

  • 10000/26 = 384.62  
  • 4541.67 + 384.62 = 4926.29
  • Tax on 4926.29 = 1440.00
  • 1440 - 1292 = 148 x 26 = Tax on additional = 3848  

 

Period 2:

  • Taxable wages: 4541.67
  • Bonus: 1000

Average Earnings Tax

  • Tax on normal earnings = 1292.00

 

Additional Earnings Tax

  • Average earnings = 4541.67 + 4541.67 + 10 000 = 19083.34/2 = 9541.67
  • Tax on average = 3426
  • 11000/26 = 423.08  
  • 9541.67 + 423.08 = 9964.75
  • Tax on 9964.75 = 3624
  • 3624 - 3426 = 198 x 26 = 5148
  • 5148 - 3848 = 1300
  • So tax on $1000 bonus is $1300

 

Example 2 - As referenced in <Bug 13900261> - EMPLOYEE TAXED HIGHER THAN BONUS ON ADDITIONAL  

Fortnightly payroll
Tax Scale 2 (Leave Loading 'Y')
HELP/SFSS checked



< 1 2012 Period >

  • Earnings 2,695.4
  • Tax Deduction 606
  • HELP Deduction 162
  • SFSS Deduction 80

Added $240 to 1 2012 period
Retropaid to 2 2012 period


< 2 2012 Period >

  • Earnings 2,695.4
  • Retro Earnings 240
  • Additional 2,000 
  • Tax Deduction 606
  • Retro Tax Deduction 76
  • HELP Deduction 162
  • Retro HELP Deduction 44
  • SFSS Deduction 80
  • Retro SFSS Deduction 8
  • Additional Tax Deduction 652
    • Step 1 : Avg earnings = (2695.4 + 2695.4 + 240)/2=2815
    • Step 2 : Tax on Step 1 = 644
    • Step 3 : Additional payments = (2000 + 240)/26= 86
    • Step 4 : Total earnings = Step 1 + Step 3 = 2901
    • Step 5 : Tax on Step 4 = 672
    • Step 6 : Diff between Step 5 - Step 2 = 28
    • Step 7 : Multiply by pay periods = Step 6 x 26 = 728
    • Step 8 : Deduct prev withheld = 728 - 76 = 652

 

  • Additional HELP Deduction 476
    • Step 1 : Avg earnings = (2695.4 + 2695.4 + 240)/2 = 2815
    • Step 2 : HELP on Step 1 = 184
    • Step 3 : Additional payments = (2000 + 240)/26 = 86
    • Step 4 : Total earnings = Step 1 + Step 3 = 2901
    • Step 5 : HELP on Step 4 = 204
    • Step 6 : Diff between Step 5 - Step 2 = 20
    • Step 7 : Multiply by pay periods = Step 6 x 26 = 520
    • Step 8 : Deduct prev withheld = 520 - 44 = 476

 

  • Additional SFSS Deduction 96
    • Step 1 Avg earnings = (2695.4+2695.4+240)/2=2815
    • Step 2 SFSS on Step 1 = 84
    • Step 3 Additional payments = (2000+240)/26= 86
    • Step 4 Total earnings = Step 1+ Step 3 = 2901
    • Step 5 SFSS on Step 4 = 88
    • Step 6 Diff between Step 5 - Step 2 = 4
    • Step 7 Multiply by pay periods = Step 6 x 26 = 104
    • Step 8 Deduct prev withheld = 104 - 8 = 96

 

Added $240 to 1 2012 period
Retropaid to 3 2012 period

 
< 3 2012 period >

  • Earnings 2695.4
  • Retro Earnings 240
  • Additional 5000
  • Tax Deduction 606
  • Retro Tax Deduction 84
  • HELP Deduction 162
  • Retro HELP Deduction 32
  • SFSS Deduction 80
  • Retro SFSS Deduction 40
  • Additional Tax Deduction 2,048
    • Step 1 : Avg earnings = (2695.4 + 2695.4 + 240 + 2000 + 2695.4 + 240)/3=3522
    • Step 2 : Tax on Step 1 = 900
    • Step 3 : Additional payments = (2000 + 240 + 5000 + 240)/26= 287
    • Step 4 : Total earnings = Step 1 + Step 3 = 3809
    • Step 5 : Tax on Step 4 = 1010
    • Step 6 : Diff between Step 5 - Step 2 = 110
    • Step 7 : Multiply by pay periods = Step 6 x 26 = 2860
    • Step 8 : Deduct prev withheld = 2860 - 652 - 160 = 2048

     

  • Additional HELP Deduction 20
    • Step 1 : As Above
    • Step 2 : HELP on Step 1 = 282
    • Step 3 : As Above
    • Step 4 : Total earnings = Step 1 + Step 3 = 3809
    • Step 5 : HELP on Step 4 = 304
    • Step 6 : Diff between Step 5 - Step 2 = 22
    • Step 7 : Multiply by pay periods = Step 6 x 26 = 572
    • Step 8 : Deduct prev withheld = 572 - 476 - 76 = 20

 

  • Additional SFSS Deduction 96
    • Step 1 : As Above
    • Step 2 : SFSS on Step 1 = 140
    • Step 3 : As Above
    • Step 4 : As Above
    • Step 5 : SFSS on Step 4 = 152
    • Step 6 : Diff between Step 5 - Step 2 = 12
    • Step 7 : Multiply by pay periods = Step 6 x 26 = 312
    • Step 8 : Deduct prev withheld = 312 - 96 - 48 = 168

 

Example 3 - As referenced in <Bug 13927348> - CURRENT PERIOD ADDITIONAL PAYMENT EXCL FROM BASE FOR TERMINATION LEAVE DEDN CALC 

Monthly payroll
Tax Scale 7


< July 2012 >

  • Earnings 5,000


< August 2012 >

  • Earnings 5,000
  • Retro Earnings LT12 Prev 2,000
  • Additional Earnings 2,000
  • Annual Leave on Termination 10,000
  • Tax Deduction 1,023
  • Additional Tax Deduction 1,344
    • Step 1 : Avg earnings = (5000 + 5000)/2 = 5000
    • Step 2 : Tax on Step 1 = 1023
    • Step 3 : Additional payments = (2000 + 2000)/12 = 333
    • Step 4 : Total earnings = Step 1 + Step 3 = 5333
    • Step 5 : Tax on Step 4 = 1135
    • Step 6 : Diff between Step 5 - Step 2 = 112
    • Step 7 : Multiply by pay periods = Step 6 x 12 = 1344
    • Step 8 : Deduct previous withheld = 1344 - 0 = 1344

 

  • Termination Leave Deduction 3,852
    • Step 1 : Avg earnings = 10000 + 2000 + 2000)/2 = 7000 <= include additional payments
    • Step 2 : Tax on Step 1 = 1694
    • Step 3 : Leave payments = 10000/12 = 833
    • Step 4 : Total earnings = Step 1 + Step 3 = 7833
    • Step 5 : Tax on Step 4 = 2015
    • Step 6 : Diff between Step 5 - Step 2 = 321
    • Step 7 : Multiply by pay periods = Step 6 x 12 = 3852

 

Example 4 - Employee on tax Variation with tax variation on bonus as ‘No’ and having current year retro extra hours and bonus in current pay period. - at 10%

Employee on tax Variation with tax variation on bonus as ‘No’ having current year retro extra hours and bonus in current pay period. - at 10% where employee paid 20hr @ $25 extra hrs = $500 and $8000.00 deferred bonus

  • SOE shows gross earnings 11871.65
  • tax deduction 3507.00
  • and run results
  • tax deduction 337.00
  • additional tax deduction 3170
  • and addit ave earning 6121.00
  • addit total payment 500
  • and balance for additional tax deductions asg le ytd is 1924

RESULTS ANALYSIS

The system calculates the retro tax at the current period tax variation. Additional Tax Deduction should be calculated on retro earnings $500.

Additional Tax Deduction for additional earnings 8000 is
Step 1 Avg earnings = 6121
Step 2 Tax on Step 1 = 1894
Step 3 Additional payments = 500
Step 4 Total earnings = Step 1+ Step 3 = 6621
Step 5 Tax on Step 4 = 2088
Step 6 Diff between Step 5 - Step 2 = 194
Step 7 Multiply by pay periods = Step 6 x 26 = 5044
Step 8 Deduct prev withheld = 5044 - 1924 = 3120

Additional Tax Deduction for retro earnings $500 is $50.

Total Additional Tax Deduction should be $3170 which the system generated.

Note: The Current year retro earnings is seen under the Additional Tax instead of Standard Tax, since we skip to process retro Tax Deduction brought forward from the current financial year for the employees with Tax Variation, the system calculates tax on the retro earnings at the current tax variation rate through AU_ADDITIONAL_DEDUCTION formula.

 


Example 5 -

Fortnightly payroll
Tax Scale 2 (Leave Loading 'Y')
HELP checked

1. Run a quickpay in the first pay period of 2012/2013 (fortnight ended 1-JUL-2012)

2. Enter back-dated element entry in pay period above:

  • Leave Hours = $3765

3. Run Retro into pay period 2:    

  • Retro Leave Hours (Curr FY) = $3765
  • Tax Deduction (Retro Curr FY) = $988
  • HELP Deduction (Retro Curr FY) = $302 ($3765 * 8% = $301)

4. Run quickpay for pay period 2.  

5. Enter back-dated element entries in a pay period in 2011/2012 (fortnight ended 17-JUN-2012)

  • Normal Hours $3765.05
  • Overtime $644.02
  • Penalty $18.58
  • Penalty Saturday $247.70
  • Penalty sunday $371.55

6. Run Retro into pay period 2

7. Run Quickpay for pay period 2 and run results:

  • Retro Taxable earnings total (Less Than 12 Mths) = $5046.90
  • Tax Deduction = $2028
  • HELP Deduction = $2298

RESULTS ANALYSIS

 

  • Additional Tax Deduction 2028
    • Step 1 : Avg earnings = 3765/2 = 1882
    • Step 2 : Tax on Step 1 = 314
    • Step 3 : Additional payments = (3765 + 5046.9)/26 = 338
    • Step 4 : Total earnings = Step 1 + Step 3 = 2220
    • Step 5 : HELP on Step 4 = 430
    • Step 6 : Diff between Step 5 - Step 2 = 116
    • Step 7 : Multiply by pay periods = Step 6 x 26 = 3016
    • Step 8 : Deduct prev withheld =3016 - 988 = 2028

     

  • Additional HELP Deduction 2298
    • Step 1 Avg earnings = 3765/2 = 1882
    • Step 2 HELP on Step 1 = 0
    • Step 3 Additional payments = (3765 + 5046.9)/26 = 338
    • Step 4 Total earnings = Step 1 + Step 3 = 2220
    • Step 5 HELP on Step 4 = 100
    • Step 6 Diff between Step 5 - Step 2 = 100
    • Step 7 Multiply by pay periods = Step 6 x 26 = 2600
    • Step 8 Deduct prev withheld = 2600 - 302 = 2298
 


Example 6 -  Retro earnings pertaining to 26 2012 not being taxed in 1 2012

Earnings in the pay is all coming from retros. No taxation being done in Pay period 1 2012 for backpay pertaining to 26 2012.  It is a major cause of concern that undertaxation has taken place in this scenaorio.

 

  • E Normal Pay 0.00
  • E Normal Pay Backpay LT12 Prev -167.72
  • E Normal Pay Backpay LT12 Prev -178.91
  • E Normal Pay Backpay LT12 Prev -178.91
  • E Normal Pay Backpay LT12 Prev -167.72
  • E Normal Pay Backpay LT12 Prev 139.77
  • E Normal Pay Backpay LT12 Prev 145.36
  • E Normal Pay Backpay LT12 Prev 167.72
  • E Normal Pay Backpay LT12 Prev 162.13
  • E Normal Pay Backpay LT12 Prev 156.54
  • E Normal Pay Backpay LT12 Prev 156.54
  • E Normal Pay Backpay LT12 Prev 167.72
  • E Normal Pay Backpay LT12 Prev 178.91
  • E Normal Pay Backpay LT12 Prev 178.91
  • E Normal Pay Backpay LT12 Prev 167.72
  • E Shift Allowance Saturday Backpay LT12 Prev 81.07
  • E Shift Allowance Sunday Backpay LT12 Prev -178.91
  • E Shift Allowance Sunday Backpay LT12 Prev 167.72
  • E Shift Allowance Sunday Backpay LT12 Prev 178.91
  • E Hourly Allowance Backpay LT12 Prev -20.06
  • E Hourly Allowance Backpay LT12 Prev 17.56
  • E Hourly Allowance Backpay LT12 Prev 20.06
  • Employer Charges 107.50
  • Tax Deduction 0.00
  • Additional Tax Deduction 0.00
  • Additional HELP Deduction 0.00
  • Additional SFSS Deduction 0.00
  • Leave Loading Additional Payment 0.00
  • Addit Ave Earning Info Information 0.00
  • Addit Total Payment Info 45.00

 

RESULTS ANALYSIS

 

  • Additional Tax Deduction 0
    • Step 1 : Avg earnings = 0/1 = 0
    • Step 2 : Tax on Step 1 =0
    • Step 3 : Additional payments = 1194.41/26 = 45
    • Step 4 : Total earnings = Step 1 + Step 3 = 45
    • Step 5 : HELP on Step 4 = 0
    • Step 6 : Diff between Step 5 - Step 2 = 0
    • Step 7 : Multiply by pay periods = Step 6 x 26 = 0
    • Step 8 : Deduct prev withheld = 0 - 0 = 0

 

Solution

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