Incorrect tax code - foreign worker

Question

Hi,

I have two new employees who I have used the wrong tax code on, they have paid 30% tax instead of the WHM 15% rate.

Do I have to reverse their pay or can I fix it up over the next two pays?

They have alreay been accepted by ATO through STP

Thanks.

Earl_HD · Answer

Hi @JSWS,

Thanks for your post and for the detailed information. I really appreciate your patience and understanding about this issue, and I do apologize for the delayed response. Submitting a negative tax amount in a separate pay run to correct a previous tax withholding error is generally not recommended and may not align with tax regulations. In most tax systems, the correction of an over-withheld tax amount is typically handled by reducing the tax withheld in future pay runs, rather than submitting a negative tax amount for a previous period.  As you mentioned, the correction can be made in the subsequent pay runs. In this case, you can reduce the tax withheld from the employee's earnings over multiple pay periods until the over-withheld amount is offset.

Please do let me know how you go on this.
Regards,
Earl

JSWS · Answer

thank you.

can I submit a negative tax amount if I submit a separate payrun? because the gross amount they will earn this week wont be enought to fix up the error (however could be amended onve next tow payruns).

I incorrectly witheld $800 in tax, it should've been approx $300, so next week even if they pay $0 tax, they will still be outstanding $200

PriyaSelvaraj · Answer

Hi @JSWS

Thanks for your post.

There are 2 options to handle this.

1) Calculate how much PAYG   tax has been overpaid or underpaid and adjust in the next pay run

2)A separate Pay run can be created to adjust the value against the PAYG category and zero out the pay items.

Refer to this helpful article Changing a recorded pay - MYOB AccountRight - MYOB Help Centre which will step you through the instructions and ensure that the employee's card has the correct tax scale.

If you have further questions, please feel free to reply.

Cheers

Priya Selvaraj