Configuring Allowance Pay Codes

Pay codes with a pay code type of Allowance that are assigned to the country of Australia or New Zealand require additional configuration. To facilitate this configuration, an Allowance tab is displayed on the Rates and Rules > Maintenance > Pay Code screen for such pay codes.

Allowance Type

This field identifies the type of allowance that this allowance represents. This field is available only and is mandatory if the allowance pay code is assigned to the country of Australia and the Itemise in STP Reports option is ticked (for more information, see below), in which case this field determines the allowance type code against which payments of this allowance will be itemised in Single Touch Payroll (STP) reporting for Individual Non Business payees. The options that are available in this field and the STP allowance type code to which each option corresponds are as follows:

Car (CD)
Transport (AD)
Laundry (LD)
Meals (MD)
Travel (RD)
Tools (TD)
Tasks (KN)
Qualifications/Certificates (KN)
Other (OD)

Tax Type

Determines how payments made against this pay code are taxed. The option available are as follows:

Taxable – indicates that amounts paid against this pay code are taxable.
Non-taxable – indicates that amounts paid against this pay code are non-taxable.
Amount Threshold – indicates that amounts paid against this pay code that exceed a threshold amount are taxable (applies to Australia only)
Quantity Threshold – indicates that quantities paid against this pay code that exceed a threshold amount are taxable (applies to Australia only).

If the Amount Threshold or Quantity Threshold options are selected, threshold validity dates and threshold values must be defined. For more information, see Defining Allowance Thresholds below.

Description

Textual description that identifies the purpose of the allowance. This field is optional unless the allowance is assigned to the country of Australia and the Other option is selected in the Allowance Type field (for more information, see above), in which case it is mandatory to key the text in this field.

If the Allowance Type field is set to Other, the text keyed in the Description field will be written to Single Touch Payroll (STP) reports for Individual Non Business payees. To help the ATO identify the purpose of the allowance, the description should be as per the bolded text below depending on the payment type to which the allowance corresponds:

overseas accommodation allowance for business purposes - G1 (general)
overseas accommodation allowance for private purposes - ND (non-deductible)
flat rate car allowance - V1 (private vehicle)
cents per km allowance for private travel - ND (non-deductible)
cents per km allowance for vehicles other than a car - V1 (private vehicle)
home office equipment allowance - H1 (home office)
internet allowance - H1 (home office)
laundry allowance for deductible conventional clothing - G1 (general)
laundry allowance for uniforms for private purposes - ND (non-deductible)
transport allowance for private purposes - ND (non-deductible)
transport allowance for business related travel not traceable to a historical award in force on 29 October 1986 - T1 (fares)
travel allowance for private purposes - ND (non-deductible)
part day travel allowance - ND (non-deductible)

Display on Payslip

If ticked, the allowance will be itemised on a payee's payslip whenever the payee has been paid against this pay code during the period to which the payslip corresponds.

GST Exempt

If ticked, no goods and services tax (GST) is payable to payees on top of any payments that are paid against this pay code. If un-ticked, GST is payable on top of payments that are paid against this pay code. GST will only be payable to payees with a tax type of Company (AU only) or Contractor (NZ only).

(STP Reporting) Itemise in STP Reports

This field is only available for allowances assigned to the country of Australia and when ticked it indicates that the year-to-date value of payments made against this pay code will be itemised against the corresponding allowance type code, as determined by the Allowance Type field, in Single Touch Payroll (STP) reports for Individual Non Business payees.

As a general rule, all taxable allowances are required to be itemised by allowance type in STP reporting and therefore, where applicable, this field is ticked by default if the Taxable, Quantity Threshold or Amount Threshold options are selected in the Tax Type field (for more information, see above).

(STP Reporting) Itemise Below Threshold

This field is only available for allowances assigned to the country of Australia and have a tax type of Quantity Threshold or Amount Threshold. When ticked it indicates that the year-to-date value of payments made against this pay code will be itemised against the corresponding allowance type code, as determined by the Allowance Type field, in Single Touch Payroll (STP) reports for Individual Non Business payees irrespective of whether the year-to-date taxable threshold has been reached.

This field is only available if the Itemise in STP Reports field is ticked.

(STP Reporting) Include in Gross Earnings in STP Reports

This field is only available for allowances assigned to the country of Australia and only if the Itemise in STP Reports field is unticked. When ticked, payments made against this pay code will be included in the year-to-date gross earnings amount in Single Touch Payroll (STP) reports for Individual Non Business payees instead of being itemised against the corresponding allowance type code.

As a general rule, all taxable allowances (and some non-taxable allowances) are required to be itemised by allowance type in STP reporting. This field is provided for upgrade/backward compatibility with pre-STP Phase 2 reporting requirements only and it is generally not recommended that this field should be ticked.

Start Date Filter

Allows you to find a specific allowance threshold validity period according to the start date of the validity period. If there is an existing allowance threshold validity period that begins on the date you specify in this field, that allowance threshold validity period will be listed in the Threshold table (for more information, see below).

This field is available only if the Amount Threshold or Quantity Threshold option is selected in the Tax Type field. For more information about threshold-based allowances, see Defining Allowance Thresholds below.

End Date Filter

Allows you to filter existing threshold validity periods according to the end date of the validity period. If there is an existing allowance threshold validity period that ends on the date you specify in this field, that allowance threshold validity period will be listed in the Thresh old table (for more information, see below).

This field is available only if the Amount Threshold or Quantity Threshold option is selected in the Tax Type field. For more information about threshold-based allowances, see Defining Allowance Thresholds below.

Threshold

Displays an existing allowance threshold validity period, where one exists for the validity start and end dates, as selected in the Start Date Filter and End Date Filter fields respectively and allows new threshold validity periods to be added.

This field is available only if the Amount Threshold or Quantity Threshold option is selected in the Tax Type field. For more information about threshold-based allowances, see Defining Allowance Thresholds below.

Defining Allowance Thresholds

Some allowances may be taxable or non-taxable depending on the amount or quantity of the allowance that is paid. Such allowances must be configured with a tax type of Amount Threshold or Quantity Threshold.

Where an allowance is threshold based, it is necessary to define the threshold value for that allowance.

Amounts or quantities paid up to the threshold amount are not subject to tax while amounts or quantities over the threshold are taxable. For example, where the tax type is Amount Threshold, it is necessary to define the maximum monetary amount that can be paid without that amount being taxed. Therefore, if the threshold is set at $1000.00 and a payee is paid a total of $1500.00 for the allowance during the course of the tax year, $500.00 of the allowance payments will be taxed.

The threshold value may vary over time and therefore it is possible to define one or more allowance validity periods, each with a different threshold value.

To define an Allowance Threshold, follow the steps below:

1.	In the Threshold field grouping on the Pay Code Entry screen, click Add+. A new, blank row appears within the Threshold field grouping.
2.	Click the calendar button next to the first field in the blank row and use the calendar control to select the date on which the threshold value takes effect.
3.	Click the calendar button next to the second field and use the calendar control to select the date on which the threshold value ceases to be effective. Skip this step if the threshold value will be effective indefinitely. An end date can be specified at a later time if necessary. However, if you want to define multiple threshold values for different validity periods, each prior validity period must have an end date.
4.	In the Threshold Value field, key in the threshold amount or quantity depending on whether the tax type of the pay code is Amount Threshold or Quantity Threshold respectively.
5.	Repeat steps 1-4 if you want to define a different threshold value for different validity periods.