Hi,
We have a number of employees on LAFHA which food and accomodation should be tax exempt. When we check in our system (Contract Power) we have this set up correctly, however, it still shows up on the employees payslip as tax deductable. Please could you advise how this can be fixed.
Thanks
Kirsten
Hi KIGRAR
To exempt a wage category from PAYG calculation, it's done by clicking into the wage category > click Exempt > tick 'PAYG withholding'. Please note that changing the settings here does not affect the pays already recorded, only applies to future recorded pays. It's also worth double checking if the correct wage categories are ticked in the employee card, and any figures entered in the Standard Pay section are correct.
If the problem persists, please provide a screenshot of the wage category set up, the employee card's Standard Pay screen and the payslip calculation, we are happy to check it further.
Hi,
Please see attached the screenshot of the wage category set up. We can see that what happens is the employee doesn't pay tax on this monthly but on their payment summaries it's showing as taxable so when they submit their tax returns to the ATO they're having to pay tax on it? I spoke to the ATO who has said it's a MYOB software issue?
Thanks
Kirsten
Hi KIGRAR
Thank you very much for the screenshots.
The payroll category setting is exempting the LAFHA category from PAYG calculation, please also double check the pay runs/payroll reports to make sure that the PAYG figure is correct in the company file.
With the pay runs recorded correctly, how it reports to ATO is determined by your STP setup. According to this ATO page - 'Living away from home allowance fringe benefits are not reportable as allowances through STP', please do check with your accountant or with ATO to set the correct ATO reporting category.
Another important matter is that the screenshot suggests you are still using STP 1, to stay compliant with the ATO, you need to move to STP Phase 2 before 1 January 2023. Please check out this Help article on Getting ready for STP Phase 2 and make the move as soon as possible.
