PeopleSoft Enterprise Global Payroll for Australia 9.1 PeopleBook

Managing Taxation Processing

This chapter provides an overview of taxation processing, retroactive tax processing, periodic tax for leave payments, and taxable earnings accumulators for Australia, and discusses how to:

Enter payee tax data.
Update payee tax scales automatically.
Run the tax file number (TFN) declaration.

Note. The PeopleSoft system delivers a query that you can run to view the names of all delivered elements designed for Australia. Instructions for running the query are provided in the PeopleSoft Enterprise Global Payroll 9.1 PeopleBook.

Understanding Taxation Processing

The Australian country extension to Global Payroll comes with all the elements required to calculate a payee's tax correctly. The system calculates taxes in a variety of situations, such as multiple payments within a calendar period, annualized tax, mid-period hires, retroactive taxation, and terminations.

As well as entering details about the pay entity (usually a company or organization), you must provide the Australian Tax Office (ATO) with TFN information. You need to enter and maintain tax-related information about each employee and submit statutory reports to the ATO.

Understanding Retroactive Tax Processing

Global Payroll for Australia provides payroll rules and elements to calculate taxes on payments that are granted retroactively. The system manages the following tax situations:

Taxes owed on retroactive bonuses when the payment applies to a single pay period.

This includes marginal tax, HELP, and SFSS.
Taxes owed on retroactive bonuses when the payment applies to multiple pay periods.

This includes marginal tax, HELP, and SFSS.
Taxes owed on back payments including salaries and wages accrued in the current financial year.

This includes annualized tax, HELP, and SFSS.
Taxes owed on back payments including salaries and wages accrued in the previous financial year.

This includes annualized tax, HELP, and SFSS.

In this section we discuss the tax calculation method that applies in each case, the key PeopleSoft delivered elements used to calculate taxes, and the inputs that users must make to ensure correct retroactive tax processing.

Calculating Taxes to Withhold for Retroactive Bonuses

For bonuses, the method for calculating taxes differs depending on whether the payment applies to a single pay period or to multiple pay periods.

Calculating Taxes to Withhold for Bonuses That Apply to One Pay Period

PeopleSoft delivers the earning element BONUS to process bonuses that apply to a single pay period.

When you use the BONUS earning element to enter retroactive bonuses, the system forwards the bonus amount or delta to the current period where it is added to all other current period earnings and taxed in accordance with the normal PAYG withholding tax tables.

Note. Enter bonus amounts for Australia using positive input.

Calculating Taxes to Withhold for Bonuses That Apply to Multiple Periods

PeopleSoft delivers the earning element BONUS QTRLY (quarterly bonus) to process bonuses that apply to multiple pay periods in a fiscal quarter.

When you use the BONUS QTRLY earning element to enter retroactive bonuses, the system follows these steps to determine the correct amount of tax to withhold:

Use the relevant tax table to work out the amount to withhold from the payee's normal earnings for one pay period.
Divide the bonus by the number of pay periods to which it relates.
Disregard any cents. For example $1.75 becomes $1. If the result is nil, there is no amount to withhold from the bonus or similar payment.
Add the amount in step 3 to the normal earning amount for a single period.
Use the same tax table used in step 1 to determine the amount to withhold from the combined payment amount calculated in step 4.
Subtract the amount worked out in step 1 from the amount worked out in step 5.
Multiply the result by the number of pay periods to which the bonus relates.

Note. Enter bonus amounts for Australia using positive input.

Data Used in the Retroactive Bonus Calculation

The key data used in the retroactive bonus calculation are the retro start date and the earning definition:

Retro start date: The bonus calculation uses the retro start date entered by positive input or through the Job Data (JOB) component to determine the periods to recalculate.
Earning definition: The system looks at the earning definition to determine the type of tax to apply. For example, the earning BONUS invokes a different type of tax than BONUS QTRLY—BONUS invokes Marginal Tax and BONUS QTRLY invokes Periodic Tax because of the different taxable earnings accumulators to which they contribute (BONUS contributes to the PD MARGINAL accumulator and BONUS QTRLY contributes to the PD GRS PERIODIC accumulator).

See Understanding Taxable Earnings Accumulators.

Calculating Taxes to Withhold For Salaries and Wages

For salaries and wages, the method for calculating back taxes differs depending on whether the taxes are owed on payments that fall within the current financial year or a previous financial year. For payments that fall within a previous financial year, the calculation differs depending on whether the salary or wages accrued less than or more than twelve months before the actual payment date.

Calculating Taxes to Withhold For Salaries and Wages In the Current Financial Year (Method A)

To calculate the marginal, HELP, and SFSS tax amounts to withhold from a back payment accrued in the same financial year that it was made, Global Payroll for Australia determines how much of the payment accrued in each prior pay period. After calculating the correct amount, it adds this amount to the other payments made in each of the prior pay periods to calculate the withholding tax, as described here:

In each affected period, add the back payment for that period to the earnings previously paid.
Use the relevant tax table to calculate the amount to withhold from the amount obtained in step 1.

Global Payroll for Australia uses the deduction elements MARGINAL TAX, HELP, and SFSS to calculate the amount of tax to withhold in each period. The HELP and SFSS deduction elements reference the TAX BR HELP RATE and TAX BR SFSS RATE brackets to determine the correct tax rates.

Note. You can view the tax rates used in these calculations on the Review PAYG Rates AUS (GPAU_TAX_SCALES), Review HELP Rates AUS (GPAU_HECS_RATE), and Review SFSS Rates AUS (GPAU_SFSS_RATE) components. Global Payroll for Australia calculates MARGINAL TAX using the PAYG Tax Scales.

See Viewing Tax Scales.
Subtract the amount previously withheld for the period from the amount obtained in step 2.

When the system recalculates the tax deduction elements—MARGINAL TAX, HELP, and SFSS—in step 2, it subtracts the old value from the new value to obtain the retro deltas for the withholding taxes.
Add the amount in step 3 to the withholding amount worked out for the current pay period.

The system forwards the additional taxes (the tax deltas calculated in step 3) from each period for which there are back payments to the current period.

Note. The tax deduction elements MARGINAL TAX, HELP, and SFSS are included in the delivered retro process override set 1 for Australia (Retro Process Definition ID = AU RETRO) defined on the Retro Process Overrides page. On this page, retro deltas for the tax deduction elements MARGINAL TAX, HELP, and SFSS are set up to be forwarded to the current period when there is retroactive processing in the current year.

Calculating Taxes to Withhold For Salaries and Wages In Previous Years When Payments Accrued Less Than 12 Months Before the Payment Date (Method B)

To calculate the marginal tax, HELP, and SFSS for salaries and wages accrued less than 12 months before the payment date, Global Payroll for Australia uses the formulas TAX FM ANNLSD, TAX FM HELP ANNLSD, and TAX FM SFSS ANNLSD.

Using these formulas, the system:

Calculates the amount of marginal tax, HELP, and SFSS to withhold from the payee's normal earnings in the current pay period.
Divides the back payment by the number of normal pay periods over which the amount accrued. For example, if a back payment applies to the period August–October and the payee is paid monthly, the number of normal pay periods over which the amount accrued is 3.
Disregards any fractional amounts. For example, $143.75 becomes $143. If the result is nil, there is no amount to withhold from the back payment.
Adds the amount in step 3 to the normal earnings in the current pay period.
Uses the same tax table used in step 1 to determine the amount to withhold on the combined payment amount calculated in step 4.
Subtracts the amount worked out in step 1 from the amount worked out in step 5.
Multiplies the result by the number of normal pay periods over which the amount accrued to obtain the total amount to withhold from the back payment.

Calculating Taxes to Withhold For Salaries and Wages In Previous Years When Payments Accrued More Than 12 Months Before the Payment Date (Method C)

To calculate the marginal tax, HELP, and SFSS for salaries and wages accrued more than twelve months before the payment date, Global Payroll for Australia uses the formulas TAX FM ANNLSD, TAX FM HELP ANNLSD, and TAX FM SFSS ANNLSD.

Using these formulas, the system:

Calculates the amount of marginal tax, HELP, and SFSS to withhold from the payee's normal earnings in the current pay period.
Divides the back payment by the number of normal pay periods in 12 months (for example, 12 monthly payments, 26 fortnightly payments, or 52 weekly payments).
Disregards any fractional amounts. For example, $143.75 becomes $143. If the result is nil, there is no amount to withhold from the back payment.
Adds the amount in step 3 to the normal payment in the current pay period.
Uses the same tax table used in step 1 to determine the amount to withhold on the combined payment amount calculated in step 4.
Subtracts the amount worked out in step 1 from the amount worked out in step 5.
Multiplies the result by the number of normal pay periods in 12 months to obtain the amount to withhold from the back payment.

Key Elements Used for Retroactive Tax Processing of Salaries and Wages Following Method A

The calculation steps for method A use the following elements:

Element	Element Type	Use
MARGINAL TAX	Deduction	This element calculates the marginal tax.
HELP	Deduction	This element calculates the HELP tax.
SFSS	Deduction	This element calculates the SFSS tax.
TAX FM MARGINAL	Formula	This element is used by the deduction MARGINAL TAX to calculate the marginal tax.
TAX FM HELP	Formula	This element is used by the deduction HELP to calculate the HELP tax.
TAX FM SFSS	Formula	This element is used by the deduction SFSS to calculate the SFSS tax.

Note. This table includes some of the key elements used in the Method A tax calculation—it does not attempt to describe all of the elements used to process taxes in the current financial year.

Key Elements Used for Retroactive Tax Processing of Salaries and Wages Following Methods B and C

The calculation steps for methods B and C require the use of numerous Global Payroll elements. The following table lists some of the key elements used to calculate retroactive taxes and notes any modifications that you may need to make to these elements:

Element	Element Type	Use
TAX DT CURR -12MT	Date	This element retrieves the current period payment date from the system element CURR PRD PYMT DT and subtracts one year from it to determine the date that is exactly 12 months prior to it. Note. The date 12 months before the payment date is critical to the tax process because the calculation method varies depending on whether salary or wages accrued more than or less than 12 months prior to the payment date.
TAX DR PERIOD RTO	Duration	TAX DR PERIOD RTO returns the difference between the retro start date or date that payments began accruing in the past (contained in the variable TAX VR RTO STRT DT) and the tax year begin date (contained in the date element TAX DT TAXYR BGN). The difference between these dates is equivalent to the duration that payments accrued over the previous year. This duration is expressed in days and is used by the formula TAX FM PERIOD WK (see below). Note. The value of the element TAX VR RTO STRT DT is set by the formula TAX FM RTO STRT DT to ensure that back payments and wages are divided by the correct number of pay periods in step 2 of the calculations described above.
TAX BR PRD FACTOR	Bracket	This bracket returns the period factors that enable the formula TAX FM PERIOD WK (see below) to convert the number of days returned by the duration element TAX DR PERIOD RTO to a specific number of weeks, biweekly periods, months, or other durations depending on the normal pay period length. The search key in the bracket is the system element PRD FREQ NAME (period frequency name), and the specific frequencies for which the bracket returns period factors are W (weekly), B (biweekly), F (every four weeks), and M (monthly). Important! You may need to define pay period factors in addition to those delivered by PeopleSoft. To do this, enter the number of weeks in the pay period for each pay period frequency you add to the bracket. For example, for a pay period frequency of every three weeks, the period factor would be 3, since there are three weeks in the period. Note. Define pay period frequencies using the Frequency Table component in PeopleSoft Human Resources (FREQUENCY_TBL).
TAX FM PERIOD WK	Formula	This formula divides the duration in days returned by the element TAX DR PERIOD RTO by seven to arrive at a duration in weeks. Global Payroll for Australia later converts this weekly duration to the correct number of months, biweekly periods, or four-weekly periods (depending on the applicable pay period length) using the conversion factor supplied by the bracket TAX BR PRD FACTOR (see above). For example, step 7 of the tax calculations in methods B and C calls for the tax liability for a single period to be multiplied by the number of periods over which taxes are due to arrive at the total tax liability. To determine the correct number of pay periods, Global Payroll uses the formula TAX FM ANNLSD (described below) to divide the number of weeks over which payments accrued—calculated by the formula TAX FM PERIOD WK—by the conversion factor returned by the bracket TAX BR PRD FACTOR. For instance, if the number of weeks given by TAX FM PERIOD WK is 8 weeks, and the standard pay period is biweekly, Global Payroll divides 8 by the conversion factor of 2 (the number of weeks in a biweekly period) to calculate the total number of periods (4) for which taxes are due.
TAX FM RTO STRT DT	Formula	This formula sets the value of the variable TAX VR RTO STRT DT used by the duration element TAX DR PERIOD RTO (see above). If the date the payments begin accruing is greater than 12 months prior to the payment date, this formula sets the value of TAX VR RTO STRT DT (retro start date) equal to the date returned by the element TAX DT CURR -12MT (the date that is exactly 12 months before the payment date). This is to ensure that the back payments are divided by the standard number of pay periods in a year (according to step 2 under Tax Calculations When Salary or Wages Accrued More Than 12 Months Before the Payment Date). And if the date payments begin accruing is less than or equal to 12 months prior to the payment date, the formula sets the value of TAX VR RTO STRT DT (retro start date) equal to the effective date of the retro trigger contained in the element TAX VR TRGR EFFDT. This is to ensure that the payments are divided by the number of pay periods to which they apply (as described in step 2 under Tax Calculations When Salary or Wages Accrued Less Than 12 Months Before the Payment Date).
TAX FM ANNLSD	Formula	Global Payroll uses the formula TAX FM ANNLSD to calculate the marginal tax in prior years following steps 1–7 of calculation methods B and C described above. This formula references other elements described in this table, including the bracket TAX BR PRD FACTOR and the formula TAX FM PERIOD WK.
TAX FM HELP ANNLSD	Formula	Global Payroll uses the formula TAX FM HELP ANNLSD to calculate HELP in prior years following steps 1–7 of calculation methods B and C described above. This formula references other elements described in this table, including the bracket TAX BR PRD FACTOR and the formula TAX FM PERIOD WK.
TAX FM SFSS ANNLSD	Formula	Global Payroll uses the formula TAX FM SFSS ANNLSD to calculate SFSS in prior years following steps 1–7 of calculation methods B and C described above. This formula references other elements described in this table, including the bracket TAX BR PRD FACTOR and the formula TAX FM PERIOD WK.

Understanding Periodic Tax for Leave Payments on Termination

To calculate periodic tax for leave payments on termination, Global Payroll for Australia averages the earnings over 12 months and then brings the average down to a per period amount by dividing it by the employee's pay period factor (that is, the number of pay periods in a year for the employee). The correct pay period factor for each employee is returned by the formula TAX FM TAX PERIODS (the pay period factor is 12 for employees paid monthly, 52 for employees paid weekly, and so on), and the tax is calculated by the deduction PERIODIC TAX which uses the formula TAX FM PERIODIC to determine the correct tax amount.

If you want to use the periodic tax formulas to calculate taxes on other earnings such as quarterly paid bonuses, you can modify TAX FM PERIODIC and TAX FM TAX PERIODS to suit your specific requirements.

Note. You can define your own pay period factors for periods not defined by PeopleSoft. To do this, modify the formula TAX FM TAX PERIODS so that it includes the factors corresponding to the new periods.

You can override the formula TAX FM TAX PERIODS at the Payee Level.

Global Payroll for Australia also calculates the periodic tax for HELP and SFSS using the formulas TAX FM HELP PERIOD and TAX FM SFSS PERIOD respectively to average earnings over 12 months.

Note. To invoke the periodic tax calculation you need to maintain the PD GRS PERIODIC accumulator. In the case of termination pay, this means maintaining the segment accumulator PD GRS LUMP MARGNL, which contributes to PD GRS PERIODIC. This accumulator contains the leave earnings that are normally paid on termination by means of positive input.

See Understanding Taxable Earnings Accumulators.

Understanding Taxable Earnings Accumulators

There are several taxable earnings accumulators to which you may need to add earning elements that you create yourself to supplement or replace the earnings delivered with Global Payroll for Australia. These are the PD MARGINAL, PD GRS ANNULISED, and PD GRS PERIODIC accumulators. They are used to calculate marginal, annualized, and periodic taxes respectively. When you create a new earning element, you should evaluate it to determine whether it is subject to one of these taxes, and if so, you should add it to appropriate tax accumulator.

Entering Information for Tax Processing

The correct calculation and reporting of tax depends on the employee data that is stored in the system.

Pages Used to Enter Information for Tax Processing

Page Name	Definition Name	Navigation	Usage
Payee Tax Data	GPAU_EE_TAX_DTLS	Global Payroll & Absence Mgmt, Payee Data, Taxes, Maintain Tax Data AUS, Maintain Tax Data AUS	Enter individual payees' tax data.
Tax Scale Update	GPAU_RC_TX01_SQR	Global Payroll & Absence Mgmt, Payee Data, Taxes, Review/Update Tax Scales AUS, Tax Scale Update	Report employees' tax scales or update the tax scales if the TFN exemption expiry date has passed.

Entering Payee Tax Data

Access the Payee Tax Data page (Global Payroll & Absence Mgmt, Payee Data, Taxes, Maintain Tax Data AUS, Maintain Tax Data AUS).

To calculate a payee's tax, the array TAX AR EE TX DTL retrieves each payee's tax data. If you have not entered all the data required, an error message indicates that payee tax information is required.

TFN Status	Select the status. Options are: Applied: The payee has shown on the employment declaration that there is an application for a TFN. The system adds the current date as the TFN exempt start date and a date 28 days later as the TFN exempt end date. In the interim, the system displays 111111111 as the payee's TFN. Note. The exempt start and end date fields are unavailable for all statuses except Applied and Not Supp (not supplied). F/P Pens (full or part pension): If the payee is on a full or part pension, the employee is exempt from providing a TFN. The system displays 444444444 as the payee's TFN. Incrct TFN (incorrect TFN): If the payee has supplied an incorrect TFN, the system does not allow you to enter a TFN. Not Supp (not supplied): If the payee has not supplied a TFN, the system adds the current date as the TFN exempt start date and a date 28 days later as the TFN exempt end date. In the interim, the system displays 000000000 as the payee's TFN. TFN NotReq (TFN not required): Used when a TFN is not required; for example, for contractors. The system displays 000000000 as the payee's TFN. TFN Prov (TFN provided): The payee has provided a TFN. After you enter the TFN, the system hides the entry, displays Entered in the field, and displays a Re-Enter TFN button. If you enter an invalid TFN, the system warns you. To re-enter a tax file number, click the Re-Enter TFN button. If an interim notice is in force for the employee, select TFN Provided and enter 222 222 222. Under 18: An employee under 18 years of age is exempt from quoting a TFN. The system automatically displays 333333333 as the payee's TFN.
Tax File Number	Enter the TFN number. Validation occurs, and you receive a warning message if the number fails validation.
Re-Enter TFN	This field is available until you enter a valid TFN. Use it to enter a different TFN if the number that you enter fails validation.
TFN Disclose to Superannuation	Select this check box to indicate that the payee has authorized you to disclose the TFN to a superannuation organization. There is no processing associated with this check box. You can use it when reporting to a superannuation provider.
Pay Entity	Enter the pay entity to which the payee supplied the tax file declaration.
Balance Group No (balance group number)	Use balance group numbers to identify the accumulator in which the system stores tax balances. You can only select balance group numbers entered for the employee on the Job Data - Payroll page.
Tax Scale	Enter the tax scale. Options are: 1: Tax Free Threshold Not Claimed 2: Tax Free Threshold Claimed 3: Non Residents 4N: TFN Not Provided - Non-Resident 4R: TFN Not Provided - Resident 5: Full Medicare Levy Exemption 6: Half Medicare Levy Exemption 7: Tax Free Threshold (No Loading) 8: Seniors - Single 9: Seniors - Separated by Illness 10: Seniors - Member of a Couple
Basis of Payment	Select the basis of payment. Options are Casual, Full Time, Labour Hire, and Part Time.
HELP Debt	Select if the payee has HELP debt.
SFSS Debt	Select if the payee has an SFSS debt.

Medicare Levy Details

Calculate Levy Adjustment	Deselect this check box to prevent the system from calculating Medicare levy adjustments. By default, the check box is selected. If you do deselect this check box, the system does not process any other selected options in the group box.
Spouse	Select if the payee has a dependent spouse only.
No. of Dependents (number of dependents)	Enter the number of dependents, including the spouse if the spouse is a dependent.

Rebates

FTB Rebate	If the payee is applying to have this benefit paid by reduced withholding tax, enter the amount of the reduction that the payee is requesting.
Other Rebates	If the payee is applying to have combined dependent-spouse, special, or zone rebates paid by reduced withholding tax, enter the amount of the reduction that the payee is requesting.
Total Rebate	The system displays the total of the FTB and other rebates.

Tax Adjustment

PAYG Adjustment

A check box exists for each type of tax: PAYG, Annualised, HELP and SFSS. Select the check box for each tax for which you want to make an adjustment. This makes the adjustment fields available for entry. For each tax, you can set an adjustment of override percentage or amount, or an adjustment of additional percentage or amount.

Contractor Details

Contractor	Select if the payee is a contractor.
ABN	If you select Contractor, enter the ABN. The system warns you if the number that you enter is not a valid ABN.
ABN Branch	If you select Contractor, enter the ABN branch

Declaration

Signature Present	Select if the payee has signed the tax declaration form.
Date Signed	Enter the date that appears on the declaration.

Updating a Payee's Tax Scale Automatically

Access the Tax Scale Update page (Global Payroll & Absence Mgmt, Payee Data, Taxes, Review/Update Tax Scales AUS, Review/Update Tax Scales AUS).

When you hire a new payee and select a tax scale, that tax scale might need to be changed. For example, when someone applies for a TFN, they have a 28-day exemption period. If a TFN is not entered in the system before the expiry of the 28 days, the tax scale must be reset. You can run the GPAUTXO1.SQR process on the Tax Scale Update page to have the system do this for you. This process checks the TFN status to determine if it is Applied or Not Supp (not supplied). If the 28 days have expired, the system performs the following actions:

Inserts a new effective-dated row of status Not Supp (for both Applied and Not Supp).
Sets the exempt start and end dates to null.
Resets the payee's tax scale to 4N or 4R.

To create a report of only employees whose tax scale needs to be changed—for example, if you want to change them manually—you can use the process page to generate the report without making automatic updates. To create a report only, deselect the Update Payee's Tax Scale check box.

Submitting the Electronic TFN Declaration

The output of the GPAU_TFN_ELC Application Engine process is a magnetic media file for submission to the ATO.

The TFN declaration has five parts:

Supplier information, which is generated from supplier data.
Payer information, which is generated from the Entering Additional Tax Information page.
Payee information, which is generated primarily from the Entering Payee Tax Data page.

It includes the TFN, name and address, terminated flag, residency status (from the tax scale), basis of payment, tax-free threshold claimed, and FTB claimed.
Software information.
File total.

Note. The information that you enter on the tax information pages is included in the following files, which you submit to the ATO: the Group Tax file, the Payment Summaries file, and the TFN Declaration file.

Page Used to Submit the Electronic TFN Declaration

Page Name	Definition Name	Navigation	Usage
TFN Declaration - Electronic	GPAU_RC_TFN_ELEC	Global Payroll & Absence Mgmt, Taxes, Create TFN File AUS, TFN Declaration - Electronic	Set the report start and end dates and select the pay entities for the report. You can specify a run type of Production or Test.