GP NZL: Payee On Tax Code ST Terminated Then Paid Extra Emolument Earnings And Taxed Incorrectly
Last updated on FEBRUARY 06, 2017
Applies to:PeopleSoft Enterprise HCM Global Payroll New Zealand - Version 9.2 and later
Information in this document applies to any platform.
On : 9.2 version, Taxes
Payee on tax code ST is terminated then paid Extra Emolument earnings and should be taxed correctly.
The issue can be reproduced at will with the following steps:
1. Employee KZ0003 is on tax code ST
2. Employee KZ0003 was terminated on 30/4/2014:
3. Results from calendar group KZ 2014M04 - Annual Leave and Long Service Leave was paid out and taxed as expected:
4. Results from calendar group KZ 2014M05 – None present, as expected:
5. Insert BONUS of $2,572.78 for calendar group KZ 2014M06:
6. Results from calendar group KZ 2014M06 – BONUS is visible, and EXTRA EMLMNT tax is calculated:
The rate used in the system above is 10.5 %, plus the earner’s levy of 1.39%. i.e. 2572 * 0.1189 = $305.81. This is incorrect, as the low threshold of $70,001 for the tax code ST was not taken into consideration.
The expected result according to the New Zealand I.R.D. Payroll Specification Document, in section 6.10 is:
Pay for period (including normal and extra pay) is $2572.78.
Truncate to $2572.
No taxable gross in the current or previous pay period, so annualised figure is zero, thus grossed up amount = $2572. Add low threshold amount for employee’s ST tax code ($70,001) giving a grossed up amount of $72,573.
Thus tax rate is 33%. Tax = 2572 * 0.33 = $848.76.
Grossed up amount does not exceed $122,063, so the Earner Levy is 1.39%, which gives $35.7508.
So Total tax = $848.76 + $35.7508 = $884.5108, which truncated to whole cents = $884.51.
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