This type of allowance will increase the employees take home (Net) pay but will not have any effect on their Tax or Taxable Gross.
Before setting up your Allowance after tax, please give some thought to Superannuation and Frequencies.
Superannuation
Should the allowance be included in the super calculation?
Is the allowance considered part of the employee's normal earnings? (OTE)
Frequency:
Each Pay – Often used for back pay, one-off payments.
Weekly – Used for an employee with a weekly allowance, who gets paid fortnightly or monthly.
Each Shift – Used for uniforms, tools, and first aid.
Hourly – Often used when employees get an allowance for working in different departments or higher duties.
Percentage - Used for adding a percentage instead of a flat dollar amount.
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 Allowance after tax
Go to the Setup, Allowances, Add, Next, and 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.
Unit Based Allowance is used for piecework or where an employee gets a set amount per unit – e.g., 0.68 cents per kilometre. With Unit based allowances, in the case of cents per kilometer, you must enter in how many kilometres the employee has travelled, which will be multiplied by 68cents.
Click Next.
On the Allowance Details screen,
In Description, type a suitable description.
In Type, select Addition.
In Frequency, select an item from the drop-down menu, i.e., Each Pay, Hourly, 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.
Leave the Taxed box blank for an addition after tax Allowance.
The Include in SG Gross box should be ticked if this allowance is included in the SG Gross threshold, (OTE).
If this allowance attracts super, tick the Include in Super Calculation box.
If you have ticked the Include in Super Calculation box, then also tick the Include in SG Gross box.
Click Next.
STP2 Reporting screen
Before selecting STP Phase 2 Reporting Groups, review the ATO's STP Phase 2 reporting – Quick reference guide withholding and reporting requirements.
Click Next.
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 and Finish.