A Deduction before tax will reduce the employee's Gross (Taxable) Pay, Tax & Net payment. Before setting up your Deduction before tax, give some thought to Frequencies.
Superannuation
Be careful ticking the Include in Super Calculation and Include in SG Gross boxes, in the case of a deduction, as it will reduce an employee's superannuation and superable earnings.
Frequency
Each Pay – Often used for one-off payments, deductions to 3rd parties (Most common for a deduction)
Percentage - Sometimes used for child support or garnishees.
Note: Once an allowance has been processed in a transaction, the Taxed box is greyed out and cannot be changed. This is to prevent serious tax issues.
Set up your Deduction before tax
Go to the Setup, Allowances, Add, Next.
Select your Allowance Type by selecting the correct radio button.
Standard Allowance (the most common type) is for entering a $ value or a % to be paid each pay, per hour, per week, etc.
The Unit Based Allowance is not often used for a deduction.
Click Next.
On the Allowance Details screen, in Description, type a suitable description.
In Type, select Deduction.
In Frequency, select an item from the drop-down menu, i.e., Each Pay, Percentage, Weekly, etc.
The Amount field may be left blank; leaving the amount field blank will enable you to enter different values for each employee on the Employee Details, Payments, Allowances screen. You can also enter the value in the Allowance Details screen if it is the same amount for all employees.
Tick the Taxed box for a Deduction before tax Allowance.
If this allowance attracts super, untick the Include in Super Calculation box.
Note: If you have unticked the Include in Super Calculation box, then also untick the Include in SG Gross box.
Next
STP2 Reporting screen
Follow the instructions below depending on your STP status
Before selecting STP Phase 2 Reporting Groups, click on the link below, as you must follow the ATO's withholding and reporting requirements - STP2 reporting codes.
Click Next.
Add the deduction before tax to the General Ledger
If you are using the General Ledger in WageEasy, complete the Allowance General Ledger Details screen. If you are unsure, skip this step and complete it at a later stage.
Click Next, then Finish.