Tax Is Calculated Incorrectly For An Employee With Special Tax Code (STC)

(Doc ID 2008161.1)

Last updated on MARCH 08, 2017

Applies to:

Oracle HRMS (New Zealand) - Version 12.1.3 and later
Information in this document applies to any platform.

Symptoms

On : 12.1.3 version, New Zealand Payroll

ACTUAL BEHAVIOR
Tax is not calculated correctly for an employee with Special Tax Code.

Example:

Employee's "PAYE Information" details:

 Tax Code: M
 Special Tax Code: Yes
 Tax Rate: 0.29
 ACC EP Special Rate: 0
 Student Loan Special Rate:
 All Extra Emol at High... No

Payroll processed for period which results in:

 Ordinary Pay 4245.35
 PAYE Tax Deduction 1231.15


The tax calculation instruction on Special Tax Code as per the IRD Specifications:

Special Tax Code  - PAYE calculations                                                                          
Sequence     Task                                                               Associated Rules               
1                 Calculate employee's pay amount for pay period
2                 Truncate pay period amount to
                   whole dollars, eg $457.89 becomes $457
3                 Calculate total amounts to be deducted                Multiply pay period amount
                                                                                        by rate on the certificate
4                 Truncate amount to whole cents                                                               

These specifications can be found on Page 55 of the IRD Spec Document for 01 April 2015 to 31 March 2016

So as per the above, the tax should be:

Step 1: Ordinary Pay 4,245.35
Step 2: Truncate the amount 4,245
Step 3: Calculate the tax (Multiply pay period amount by rate on the certificate) 4,245 x 0.29 = 1231.05


EXPECTED BEHAVIOR
Expect tax to be calculated based on instruction for Special Tax Code as per IRD Specifications.


BUSINESS IMPACT
The issue has the following business impact:
Taxis not calculated correctly for employees with STC tax code as per the legislative requirements.

Cause

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