Different day in lieu cashouts taxed at different rates

Question

Hi experts, I need some assistance please. Our staff are entitled to claim days in Lieu when travelling or working over weekends or holidays and our in-house instruction is that the staff member either has the day off within a specific time period or if that is not possible, they are paid out.

One particular staffer noticed that when he was paid out a day as part of his salary the PAYE was different to when he was paid out a day on its own, as in not part of a pay run.

He asked me how this was possible and I haven't any idea at all how this works.

We are on MYOB Payroll and it is in the works for us to move over to MYOB Payroll for business from EOM.

I was also asked to confirm why they would need to pay in to the IRD if their PAYE has been deducted correctly. I have no idea about that either I'm sad to say. I just use and trust the software to be correct. I do run the updates when I am notified about them.

If anyone has any answers for me I'd sure appreciate them!

Thanks and have a great afternoon :-)

Heather

earl_hd · Answer

Hi HethBennett,When dealing with different rates of tax for different day in lieu cashouts in MYOB Payroll, it is important to consider the specific details of how these payments are handled within the system. Here are some general steps and considerations:

Identify Cashout Types:
  
   Determine the specific types of day in lieu cashouts that are being processed. Each type might be subject to different tax treatments depending on your employer's policy and local tax regulations.
  
 Tax Calculations:
  
   Different cashout payments may be taxed at different rates based on their classification (e.g., ordinary earnings vs. termination payments).
  
 Use of MYOB Payroll Settings:
  
   Within MYOB Payroll, you can set up different pay items to reflect the different types of cashouts. Ensure that each pay item has the correct tax settings applicable to the type of payment.
  
 Payroll Policies and Configurations:
  
   Review and configure the relevant payroll policies that govern the taxation of these payments. This might involve setting specific rules for when and how these cashouts are processed and taxed.
  
 Consult Tax Guidelines:
  
   Refer to the local tax office or a tax professional for the precise tax rates and advice on how to handle different types of cashouts and their tax treatments.

I hope this helps!&nbsp;
Regards,Earl

jenniek · Answer

Hi HethBennett&nbsp;
In MYOB Payroll you needed to use the tax override button when processing includes any lump sum payments, cashouts, termination pays etc. If you didn't this could have resulted in an employee getting a tax bill at year end. Same would happen if you cashed out the Day in Lieu as part of wages, or separately - the tax would likely be different. Business Payroll will be the same - but you will need to manually calculate the tax, rather than old MYOB Payroll would let you choose a secondary tax code.

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Different day in lieu cashouts taxed at different rates

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