Can you please explain how allowances and deductions are handled in Cashbook?
Both allowances and deductions may affect your employee's taxable income:
Allowances: are amounts paid to cover anticipated costs or as compensation for conditions of employment, and are paid regardless of whether the employee incurs an expense.
An allowance can be added to an employee's pay before or after tax is calculated. If it is added before tax - the allowance is added to the gross pay before tax is calculated. ie. the employer needs to withhold PAYG tax on it. If you are unsure ask your accountant or look at the ATO website.
Reimbursements: are the paying back of business expenses that an employee may have incurred but generally tend to be of a one-off or specific nature. (These are included in the Allowances section of Payroll.)
Deductions: are payment that you take out of employee's pay, for example child support payments or union fees.The issue of payroll deductions is one where employers need to be especially vigilant and cautious. Deductions have to be authorised in writing by the employee and is principally for the employee's benefit. For more information on deductions click on the workplacefairness link: Deductions From Pay.
To know exactly whether tax is payable on an allowances you should ask your accountant or contact the ATO. Click on the following ATO link for more information: What is the correct withholding treatment for allowances?
A deduction can be taken out of an employee's pay before or after tax is calculated. If it is taken out before tax is calculated, this decreases the employee's gross wage, and consequently the amount of tax they pay (another name for these before-tax deductions is 'tax deductible'). If you are unsure, ask your accountant or look at the ATO website.
ALLOWANCES & REIMBURSEMENTS
Step 1: Add/Edit an Allowance type in Payroll:
For this example we'll create an allowance paid for cents-per-kilometre vehicle use.
To Edit a New Allowance (or Reimbursement):
Step 2: To add a new Allowance for an Employee:
Step A: To Add or Edit a Deduction
For this example we'll create a deduction for child support payments.
To Add a new Deduction:
Step B: To Add or Edit an Employees Deductions: