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Community > AU Payroll >

AU Payroll: Setting up Payroll for NFP Salary Sacrifice/Reportable Fringe Benefits

Started by Thomas BODGER -   in AU Payroll

I need a bit of help setting up Payroll to record Not for Profit Salary Sacrifice payments. The ATO allows Not for Profits a higher reportable fringe benefit amount before FBT kicks in ($30,000 grossed up) which effectively allows us to pay employees a proportion of their salary tax free. We use a third party to administer this for us as there are various compliance issues. Each month we pay a total amount to this third party and they make individual payments to the employees. At the same time we make taxable salary payments to the employees.

Using our old system we put this all on the one pay advice. An employee paid $5,000 in total each month might have $3,750 as taxable salary (with to keep it simple $750 as tax), and $1,250 as salary sacrificed untaxed through the third party. Super is only paid on the $3,750 taxable salary.

The accounting entries are:
Debit Salary Expense $5,000
Credit Wages Payable $3,000 (after tax "taxable salary") which goes to the employee
Credit Accounts Payable $1,250 which goes to the 3rd party salary sacrifice company
Credit PAYG payable $750
Debit Superannuation Expense 9% of $3,750 = $337.50
Credit Super payable $337.50

It's important that the salary sacrifice portion goes on the payslip and gets added up for the annual payment summary to be shown as Reportable Fringe Benefits.

I've played around and achieved the accounting entries by using an allowance for the salary sacrifice amount, and then an equal deduction to stop it from being included in the amount paid directly to the employee. However this causes the deduction to be shown on the payment summary.

Ideally I'd like to be able to set up an allowance that doesn't automatically get added to the amount paid to the employee and goes to a different accounts payable account. Is that possible?
Best Reply as chosen by Quenby S (Community Manager)
Hi Nalin,

Sure, in the employee's details you can list up to 4 bank accounts to split the pay. I used this to split the pay between normal and salary sacrifice bank accounts. Eg. The employees normal bank account and then where their salary sacrifice goes.

In the pay run, I add a salary sacrifice deduction to reduce the payg calculation.
Then I add an expense reimbursement for the salary sacrifice amount.

Ensure the bank payment is equal to the net pay plus the sacrifice amount.
Then I ensure the bank split has the correct amount per the pay run.

It is easiest if you structure your sacrifice amounts as exactly the same each pay run, otherwise you have to edit the bank split each time.

Hope this helps.

Josie Ludwig