Tax Calculation Parameters
You set up tax calculation parameters to define the rates that are associated with each tax scale that the system uses for calculating employee payroll taxes. You set up tax calculation parameters using the Australian Tax Parameters program (P75A0001). Because the limits, rates, and adjustment amounts differ for each tax scale, you must set up tax calculation parameters for each tax scale.
Tax rates, limits, and adjustment amounts might change periodically. To accommodate changes in these amounts, tax calculation parameters are date-specific. If the rates, limits, or adjustment amounts change, you can enter a stop date for the outdated tax calculation parameters and set up new parameters, entering the date that the tax change becomes effective. For example, if you know that tax rates are going to change on a specified date, you can set up tax calculation parameters in advance, and use start and stop dates to ensure that employee payroll taxes are calculated using the rates, limits, and adjustment amounts that are current at the time the employee is paid. To obtain current tax calculation information, contact the local taxing authority.
To ensure that the system calculates employee payroll taxes correctly, you must assign a tax scale to each employee. This table shows simplified examples of tax parameters and demonstrates how tax rates might be calculated for a New Zealand employee with a tax scale of M:
Limit Number |
Limit Amount |
Rate Number |
Rate Amount |
Adjustment Number |
Adjustment Amount |
|---|---|---|---|---|---|
Limit 1 |
9500.00 |
Rate 1 |
.1500 |
Adjustment 1 |
0.00 |
Limit 2 |
38000.00 |
Rate 2 |
.2100 |
Adjustment 2 |
570.00 |
Limit 3 |
999999999.00 |
Rate 3 |
.3300 |
Adjustment 3 |
5130.00 |
Limit 4 |
0.00 |
Rate 4 |
0.00 |
Adjustment 4 |
0.00 |
Limit 5 |
0.00 |
Rate 5 |
0.00 |
Adjustment 5 |
0.00 |
Limit 6 |
0.00 |
Rate 6 |
0.00 |
Adjustment 6 |
0.00 |
Limit 7 |
0.00 |
Rate 7 |
0.00 |
Adjustment 7 |
0.00 |
Limit 8 |
0.00 |
Rate 8 |
0.00 |
Adjustment 8 |
0.00 |
If the employee earns more than 9,500.00 but less than 38,000.00, the entire amount is taxed at a rate of 21 percent.
Then the adjustment value of 570.00 is deducted from the calculated tax amount.
If an employee earns more than 38,000.00, the entire amount is taxed at the rate of 33 percent.
Then the adjustment amount of 5,130.00 is deducted from the calculated tax amount.
In addition, earner premium tax would be calculated on all applicable pay.
In most cases, regular pay is always subject to earner premium tax.
Note: For purposes of the example, actual earner premium tax calculations were not included. However, earner premium tax would be calculated on all pay types that are not set up to be excluded from the earner premium tax calculation. For more information about tax calculations and tax regulations, contact the local taxing authority.