Processing schedular payments (formerly withholding payments) (New Zealand)
Withholding Tax is a tax on Schedular Payments. This Tax is normally processed from contractors (and/or employees) performing activites outlined in schedule 4 of the Income Tax Act 2007. The Withholding Tax Rate depends on the type of activity being performed.
Withholding Tax on Schedular Payments can be processed in MYOB Exo Payroll using either an allowance or the WT tax code. An allowance would normally be used for employees who are paid under a standard Tax Code, such as M, but have performed activities outlined in schedule 4 of the Income Tax Act 2007 and should have those activities taxed at the Withholding Tax rate. The WT tax code is used for employees that are setup in MYOB Exo Payroll, such as contractors, who are receiving schedular payments that are to be taxed Withholding Tax on those payments.
The following procedures are guides for setting up and processing an employee using either the WT tax code or an allowance set for Withholding Payments:
- Log into the Payroll Company, select Maintenance from the Menu then select Allowances.
- Click on the Add:F4 button in the bottom of the screen or press F4 on the keyboard. Using either the default code that appears or entering a specific code then enter an appropriate name, e.g. "Commission @ 19%".
- Leave the Taxable option selected.
- Set the Type to "Withholding Payment".
- Enter the appropriate Withholding Tax rate.
- The payment is not liable for earner levy and is generally not liable for ACC Employer Premium. Un-tick the Add Earner Levy box and tick Not Liable for ACC box.
- Tick or untick the other items in the Options section as appropriate.
- Now Save this allowance by pressing F10 or click on the Save:F10 button at the bottom of the screen.
- If paying GST on the Withholding Payment, add another new allowance using the next default code or entering a specific code. Enter an appropriate name, e.g. "GST @ 15%". Set the Calculation Method to "Percentage of Total Gross". Make the payment non-taxable and enter the GST Percentage Rate.
Select the pay that the allowance is to be added to. This could be either the Standard Pay, Current Pay or One Off Pay or a combination. Choose the employee then click the Allowances button to open the Allowances window. Add the allowance created in Step 2. If paying the GST portion as well then also add the GST allowance created in Step 9.
Withholding payments are shown on the IR348 as a separate line for the employee, with tax code WT.
- Log into Payroll Company and go to Employee Maintenance screen either through file- open employee or click on second icon from the top Menu Bar.
- On the Employee Details tab of the Employee Maintenance window, set the employee's tax Code to "WT".
- A Tax Rate field appears below the Tax Code. Specify a tax rate, e.g. 17 for 17%. Withholding Payments are not liable for Earner Levy, so leave the Add Earner Levy option un-ticked. Normally the employee would not have any Student Loan calculated. In this case, clear the Student Loan Rate field. If the employee does want to have Student Loan calculated then enter the rate into the Student Loan Rate field.
- Save the employee details by clicking on the Save:F10 button or pressing F10.
- If paying GST on the Withholding Payment, go to the Maintenance menu then select Allowances and follow steps 9 and 10 above.
Enter the pay information into the appropriate Pay. All amounts will be taxed at the specified Withholding Tax rate of the WT tax code or, if an allowance has a tax rate specified in Allowance Setup and is used in the pay then that allowance will be taxed at that specified rate.
If a GST allowance has been added to the pay then the Net Pay will include the GST proportion.
Need more help? You can open the online help by pressing F1 on your keyboard while in your software.
You can also find more help resources on the MYOB Exo Employer Services Education Centre for Australia or New Zealand.