Payroll

Table of contents for: 2 Manage payroll services2.1 ValleyView2.2 Workplace3 Establish procedures for managing payroll services3.1 Establish procedures3.2 Security of payroll information3.3 Control measures3.4 Establish systems3.5 Self-assessment checklist4 Prepare payroll data for forwarding to head office4.1 Deductions4.2 Meet timelines4.3 Self-assessment checklist5 Authorise payment of salaries5.1 Reconciliation5.2 Authorise payroll5.3 Respond to enquiries5.4 Self-assessment checklist6 Administer salary records6.1 Distribute payroll deductions6.2 Payment requirements6.3 PAYG Withholding6.4 PAYG payment summaries6.5 Self-assessment checklist7 ValleyView

Table of contents for:Sunday, 10 April 201112:30 PM

Table of contents Page 1

Manage payroll servicesEven though ValleyView has a payroll system in place, the manager of the new multimedia operations will need to establish procedures for managing payroll services in the new office and dealing with any payroll issues that arise in the new location.There’s a lot more to managing a payroll service than simply paying people. While head office at ValleyView takes care of the payroll system, the manager at the new office will need to manage a vast array of record-keeping and regulatory requirements.ValleyView Publishing has purchased and customised an automated payroll system to manage the payroll. This system is known as ValleyView Automated Payroll System (VAPS). ValleyView’s payroll procedures can be accessed in the ValleyView Intranet.Develop a payroll services orientation and procedures manual for:your workplace or ValleyView.If you need some help before you start, work your way through the following topics.Establish procedures for managing payroll services

establish procedures that will minimise any risks associated with employment and payment of staff

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ensure the security of payroll data•monitor compliance with internal control measures•ensure that records are correctly maintained.•

In managing payroll services it is important to:

Salary calculations are affected by employment contracts, awards and agreements.•Voluntary and statutory deductions must be considered when calculating salaries.•Payroll information must be completed within designated timelines.•

Prepare payroll data for forwarding to head office

It is essential to ensure that payroll information is accurate by undertaking internal checks.•Payroll systems can produce reports and reconciliation checks to verify payroll accuracy.•Payroll transactions should be substantiated, verified and authorised by an appropriate person.

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Organisational policies and procedures and legislative guidelines should guide the response to pay-related enquiries.

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Authorise payment of salaries

Administer salary recordsAll employees must complete Tax File Number Declaration and/or Withholding Declaration forms.•Details of payroll deductions must be forwarded to relevant authorities within specified timelines.•Payroll-related payments to authorities must be made in accordance with organisational and legislative requirements.

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PAYG is the new name for Group Tax.•PAYG Withholding is the system through which an organisation withholds tax from the payments it makes to others.

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Payment summaries must be provided to all employees•

Dont forget, you can also visit ValleyView for additional advice and information.

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Develop a payroll services orientation and procedures manual at ValleyViewPublishingThe manual should be developed so that it provides an orientation for the incoming administration manager and new payroll administration staff.

a brief overview of the payroll system○

an overview of a payroll software system○

an overview of the roles and responsibilities of the staff involved with processing and managing the payroll

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a description of the procedures for the management of payroll○

a description of the procedures for preparing payroll○

a description of the procedures for checking, authorising and reconciling the payroll○

a description of the procedures for administering payroll records○

an overview of internal control systems to ensure efficiency○

an overview of risk management strategies○

Payroll service orientation: •

confidentiality of payroll information○

security of payroll information○

accuracy of salary payments○

accuracy of allowance claims○

accuracy of statutory and voluntary deductions○

payroll data is calculated within designated timelines○

payroll is authorised and reconciled according to workplace policy○

payroll records are correctly administered.○

Payroll service procedures: •

Include the following sections:

Keep a record of the resources you consulted in developing your manual for ValleyView.

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Develop a payroll services orientation and procedures manual at your workplace

management is aware of your proposed activities and agrees to allow you to develop a payroll services procedures and orientation manual for your workplace

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you comply with all privacy, confidentiality and commercial in-confidence requirements•you consult with your teacher regarding your approach to this task.•

If you have chosen to complete this task in your workplace, you will need to make sure that:

a brief overview of the payroll system○

an overview of the payroll software○

an overview of the roles and responsibilities of the staff involved with processing and managing the payroll in your workplace

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a description of the procedures for the management of payroll○

a description of the procedures for preparing payroll○

a description of the procedures for checking, authorising and reconciling the payroll○

a description of the procedures for administering payroll records○

an overview of internal control systems to ensure efficiency○

an overview of risk management strategies○

Payroll service orientation: •

confidentiality of payroll information○

security of payroll information○

accuracy of salary payments○

accuracy of allowance claims○

accuracy of statutory and voluntary deductions○

payroll data is calculated within designated timelines○

payroll is authorised and reconciled according to workplace policy○

payroll records are correctly administered.○

Payroll service procedures: •

The manual should be developed so that it provides an orientation for a new manager and new payroll administration staff. Include the following sections:

2.2 WorkplaceSunday, 10 April 201110:06 AM


Payroll management systems'Management systems’, including payroll management systems and management information systems, is a term used to refer to all of the processes, procedures, policies, hardware and software for a particular function.ValleyView uses an off-the-shelf automated payroll management system that has been customised to suit the ongoing needs of ValleyView. The system is known as ValleyView Automated Payroll System (VAPS). VAPS allows the payroll officers at ValleyView to manage and process payroll for all staff at ValleyView.Familiarise yourself with VAPS and what it can do by reading ValleyView’s Payroll procedures on the ValleyView Intranet.

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Establish proceduresA procedure (or process) is a series of ordered steps or tasks that is used to achieve a desired outcome.

helping with quality control and the management of risks•ensuring that legislative and statutory requirements are met•ensuring there is consistency of a product or service•lowering response and delivery times•assisting in problem-solving•helping to track non-compliance and variations.•

A procedure can minimise the likelihood and impact of undesirable events or outcomes by:

Effective procedures can reduce some of the financial risks associated with the employment and payment of staff.Consider what makes an effective procedure. Think of at least five features of an effective procedure. When you have finished, select Feedback to compare your response.FeedbackLook at ValleyView’s Payroll procedures. What procedures can you identify that align with the features you have identified?

Financial risks

a shortfall of funds to cover payroll payments•inadequate information to use as a basis for making staffing decisions•Australian Tax Office (ATO) penalties•inaccurate employment details•dissatisfied employees if paid incorrectly•overpayment of employees.•

Financial risks that relate to managing payroll include:

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Feedback

All necessary steps or requirements are included.•Tasks are done in a logical and sequential order that avoids duplication, unnecessary steps or tasks, bottlenecks and backtracking.

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Points where choices are to be made are clearly identified and explained.•Checks are done at critical points.•Appropriate and approved authorities exist•Interdependencies between different work areas are shown.•The procedure can be performed in the time allocated.•The procedure is kept up-to-date in terms of new or changed policies, regulations and so on.•

Features of an effective procedure

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Security of payroll informationSecurity of payroll data and records is essential to ensure confidentiality and must be given a high priority at all times by payroll processing and management staff.Some of the measures that can be implemented to ensure confidentiality include:Martin Horgan is ValleyView’s Accountant and is responsible for the management of the payroll system. Martin has put in place strict internal control procedures to ensure the security of the payroll information.Vanitha is the Administration Officer who reports to Martin. She comments that she thinks Martin is over cautious. How do you think Martin should respond to Vanitha?Think about your response and then check the Feedback.Feedback

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ConfidentialityEnsuring confidentiality of payroll information is a legal requirement. Organisations are bound by the requirements of the Privacy Act 2000 (Cwlth) and the Privacy Amendment (Private Sector) Act 2000 (Cwlth). They are also required to comply with the National Privacy Principles when collecting and using any personal information gathered from staff. You can find more information about privacy legislation by using a search engine to locate the Office of the Privacy Commissioner in your state or territory.In the management of payroll systems you may need to assist your payroll staff to develop their own confidentiality protocols to ensure that the data they access or process is only used for the purpose for which it was intended.

FeedbackIt is important to remember that the internal control systems we follow are not simply to prevent theft and fraud and to ensure security and confidentiality of payroll data. Good internal control protects you and your organisation, while poor internal control may leave you liable to suspicion or accusation in the event of an irregularity.

3.2 Security of payroll informationSunday, 10 April 201111:56 AM




The key to competent, secure and efficient management of payroll is sound internal control measures.

payroll data complies with legislation (a complex range of legislation governs the employment and remuneration of staff. As a payroll manager it is important that you are aware of the legislative framework relevant to your industry.)

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budget control is maintained•all transactions are timely, and relevant reports are generated•all payroll information is accurate, relevant and understandable•all payroll transactions are authorised and approved by the appropriate authority, for example, the payroll manager

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information is complete and reflects reality•payroll transactions are correctly coded and entered•information used to calculate payroll payments and deductions is up to date and correct•security procedures ensure the confidentiality and security of payroll information•source data documents are filed appropriately and retention requirements met.•

As well as assisting in the minimisation of risks, control measures relating to the management of payroll, ensure that:

ValleyView’s Payroll procedures provide an example of security procedures and control measures.If you manage payroll services it is important that you monitor the compliance with any internal control measures in place in your organisation. This will safeguard your organisation’s financial resources as well as ensuring accurate, secure and confidential payroll information for staff.

Employee termination dates are not recorded on the payroll system for fixed-term and contract employees.

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Time sheets for freelance employees are not checked and authorised prior to payment. 2.Pre-employment processes are not adhered to for employment of new staff. 3.

Read the following scenarios and recommend an appropriate internal control measure in each case.

Post your recommendations to the ValleyView Meeting room using the heading Internal control measures. Compare your answer with other postings on this topic. Give some feedback to at least one other posting.

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Control measuresControl measures are the processes, procedures and systems that assist the organisation to achieve its aims and objectives.

supervision of time sheets•time sheets being checked prior to being processed•employees signing for pay, which ensures that cheques or cash are only collected by the employees

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segregation of duties, which ensures that more than one staff member is involved, such as one to authorise, another to process information and another to check records

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passwords and restricted access, which ensure that access to the payroll system is available only to authorised persons and that only authorised transactions are entered

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pre-employment checks.•

Control measures for payrolls include:

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Appropriate systems must be put in place to ensure that records are correctly maintained and kept for the appropriate period of time.It is important that systems are established to meet any statutory obligations; for example, taxation legislation has a number of obligations in relation to record keeping when payments are made to employees. Examples include:

-Pay as you go (PAYG) Withholding: Employers must obtain Tax File Number Declaration Forms from all their employees.-Superannuation contributions: Employers must make sufficient superannuation contributions to a complying superannuation fund or retirement savings account for most employees, including full-time, part-time and casual staff.-Fringe benefits tax: Employers need to keep records that show the taxable value of each fringe benefit provided to each employee.

payroll records are correctly maintained and kept for the appropriate period of time1.statutory obligations are met2.personnel records contain all information required under legislation.3.

Conduct some research of a workplace to find out how a payroll system ensures that:

Keep a record of the notes you made from your research. You may wish to keep these notes to refer to in the future.

Records are correctly maintainedIt is important that comprehensive personnel files for each employee are maintained and stored in a secure and fire-proof environment. In addition, access must be restricted to nominated authorised staff.Any payroll records that are produced should also be filed and stored securely. Check ValleyView’s payroll procedures for information on how ValleyView maintains personnel records.

Appropriate period of timeIncome tax legislation requires that wage and tax records (that is, payment summaries and Tax File Number Declarations) be kept for a minimum period of seven years. Organisations are required to keep and maintain complete and accurate time and wage records.

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Self-assessment checklist Complete this checklist to self-assess whether you're ready to move on to another topic.

I understand the risks involved in managing a payroll service and can identify procedures that can minimise the risks involved. (If not, you may need to review Establish procedures.)

I understand the legislative requirements for ensuring the confidentiality of payroll information. (If not, you may need to review Security of payroll information.)

I understand the importance of sound internal control measures in ensuring secure and efficient management of payroll services. (If not, you may need to review Control measures.)

I understand that systems must be established for the correct maintenance of payroll records and to meet statutory obligations. (If not, you may need to review Establish systems.)

3.5 Self-assessment checklistSunday, 10 April 201112:02 PM


Calculate salaryCalculating salary is an important part of managing the payroll. Depending on the organisation, salary details may need to be entered into a system for automatic calculation, or calculated manually. It is important, therefore, that you have a good understanding of how salary is calculated.

employment contracts•An employment contract arises when an employer offers and an employee accepts employment. Where relevant awards or agreements do not cover the pay and conditions of employment, the employment contract should specify what these conditions are. Most states have laws that set out minimum conditions of employment that apply to all employees in that state, for example, minimum adult wages.

federal or state awards•Awards set out minimum wages and conditions of employment for specified employees and may also include provisions about specific issues such as superannuation or long service leave. Awards provide a safety net of fair and enforceable minimum wages and conditions of employment. Pay and conditions above the safety net will be set by agreement between the employer and the employees, rather than comprehensively detailed in the award.

workplace agreements•Workplace agreements are written documents setting out conditions of employment between an employee or a group of employees and an employer.To find out more you should refer to the federal workplace relations system on the Workplace Authority website.

employment status of staff.•Employment of staff may be casual, part-time, full-time, fixed-term or ongoing.

The calculation of salary depends on a range of variables, including:

You can find out more information about the calculation of payroll data by looking at the ValleyView payroll procedures, which can be found in the ValleyView Intranet.

the appropriate hourly rate (full-time, part-time, casual or contract)•deduction details such as HECS, health fund, superannuation•taxation details (PAYG Withholding rates or Australian Business Number of contract employees)

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allowances. •

When a new employee starts at ValleyView, the following employee details are entered into VAPS:

Every fortnight, VAPS makes a payroll calculation and produces a payslip that provides each employee with a range of information. You can find out more specific details by reading ValleyView’s Payroll procedures available in the ValleyView Intranet.

What employment contracts, federal or state awards or certified/workplace agreements, operate in the workplace?

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How do payroll staff ensure that employees are receiving all appropriate entitlements? 2.How do these entitlements affect the calculation of salaries? 3.

Find out what happens in your own workplace or, if you are not working, make arrangements to conduct some research in a workplace.

Post your answers to these questions to the VallyView Meeting room, using the heading Payroll management systems. Read other postings on this topic and look at how different pay and employee conditions can affect the calculation of salaries, and the different techniques that can be used to ensure employees are receiving all their entitlements.

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http://www.workplaceauthority.gov.au/

http://www.workplaceauthority.gov.au/


statutory deductions (statutory deductions include Medicare levy, PAYG Withholding and Higher Education Loan Programme (HELP) or Higher Education Contribution Scheme (HECS))

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voluntary deductions (voluntary deductions are those an employee chooses to have deducted from their salary. Examples include health insurance premiums, life insurance premiums and union fees).

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There are two types of deduction you will need to be aware of when processing payroll data:

The calculation of each deduction will depend on the procedures relevant to each deduction; for example, PAYG Withholding is determined by the amount earned. Information about statutory deductions can be found on the ATO website at www.ato.gov.au.

PAYG Withholding requires the completion of the Tax File Number Declaration by the employee and the Withholding Declaration by the employer

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health funds have standard deduction forms the employee is required to complete and sign before a deduction can be requested from an employer.

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It is important when completing each deduction that the appropriate government and employee documentation is used; for example:

If you are unsure of how to deal with a deduction, you should access a reliable source of information. In the following activity, you could check the ATO website at www.ato.gov.au or and search the site for "HECS".Tran Nguyen is an Editorial Assistant at ValleyView and has an annual salary of $35 400. Tran is currently studying and has an accumulated HECS debt.

Explain to Tran how the HECS process works and what happens to the amount being withheld.1.What do you estimate Tran’s yearly HECS payment to be, based on his current salary?2.

Tran has recently checked his HECS debt and is concerned that the amount being taken out of his salary has not been credited to his HECS account. He has also queried the amount of additional tax being withheld.

When you have finished, check the Feedback to compare your answers.Feedback

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Feedback

HECS is charged on a semester basis for every semester of the course in which he is enrolled•as he has decided to defer his payment of HECS, he will need to pay the money back through his tax

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the employer will estimate how much the HECS repayment for the year is likely to be by referring to the HECS repayment tables found on the HECS website

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the employer then withholds additional tax from Tran’s pay each payday to pay for HECS•even though the additional tax is taken from Tran’s pay each payday, the money is not credited to his HECS account during the year, but will be shown on his annual PAYG Payment Summary.

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the final HECS repayment amount will not be calculated until Tran’s income tax return for the year is processed

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if his employer withheld more than the final HECS amount required by the ATO, the ATO would refund any extra funds

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even though the amount withheld is not credited to his HECS account during the year, the total amount will be shown on his annual PAYG Payment Summary as ‘tax withheld’ and on his income tax notice of assessment as label E ‘PAYG withholding credits’

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the ATO provides a percentage list of salary thresholds for each tax year; for example, for the 2002–2003 tax year the threshold for Tran’s salary ($35 400) is 4.5%, therefore, Tran can expect to pay $1593 for the year.

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You could explain to Tran that:

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all employees are paid in full, with entitlements to leave, allowances and so on•all deductions are distributed to appropriate authorities to meet timelines that may be imposed by those authorities

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timelines imposed by other statutory authorities are met, for example, ATO and Superannuation Guarantee

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key dates for Business Activity Statement (BAS) lodgment and end-of-financial-year processes are met.

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It is essential that payroll data is provided for processing within designated timelines to ensure that:

How/when should Vanitha process payroll data for staff ceasing employment in December?

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How and when should Vanitha process payroll data for staff to be hired or rehired in the new year?

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Vanitha Vismartali is responsible for processing ValleyView’s payroll. Vanitha has some queries regarding end of year tasks.

You should refer to ValleyView’s payroll procedures to answer these questions. When you have finished, check the Feedback to compare your answers.FeedbackOnce Vanitha has received the appropriate termination advice, she should calculate the final salary and arrange for a ValleyView cheque to be issued. Vanitha should also ensure that the employee’s data is made inactive on VAPS.

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As long as the new employee data has been input correctly into VAPS by the Wednesday prior to pay confirmation, Vanitha should be able to process payroll normally and the employee should be able to receive their salary.

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Designated timelines

the date that PAYG Withholding must be paid•superannuation reporting and lodgement dates•the date by which Payment Summaries must be completed and issued to employees.•

The ATO has a range of designated timelines that organisations must comply with, for example:

The ATO website at www.ato.gov.au provides detailed information on timelines applicable to this financial year.Each organisation will also have its own internal timelines for when payroll must be reconciled, authorised, processed and so on. Read ValleyView’s payroll procedures to gain an understanding of how these timelines work in practice.

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www.ato.gov.au

Self-assessment checklist Complete this checklist to self-assess whether you're ready to move on to another topic.I understand the variables that can apply when calculating salaries. (If not, you may need to review Calculate salary.)I understand that statutory and voluntary deductions need to be considered when preparing payrolls. (If not, you may need to review Deductions.)I understand that it is essential that payroll data is provided for processing within designated timelines. (If not, you may need to review Meet timelines.)I understand that there are both internal and external timelines to comply with when providing payroll information. (If not, you may need to review Meet timelines.)



Check payrollIt is essential that staff involved with processing payroll undertake checking processes to ensure the accuracy of payroll data.

inaccurate payroll records and calculations•payment for work not performed•overpayment •superannuation, PAYG Withholding, Fringe Benefits Tax (FBT) costs being incorrectly calculated.

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Failure to check payroll data adequately could result in any of the following:

Payroll audit trail report•Payroll run control report•Over/underpayment summary report•Payroll register report.•

There are several payroll reports produced by VAPS that are run regularly to assist in the process of checking the accuracy of payroll data and records. These reports are:

You can find out information on these reports by checking ValleyView’s payroll procedures. Norlene Lorensini is the Administrative Officer in Acquisitions, and has requested a reduction in her time fraction to 0.6 for the remainder of the year. The Head of Acquisitions and the Manager of Human Resources and Finance have approved this change. On checking the Payroll Register Report, it appears that the appropriate information was not entered into VAPS within the required timelines. The result is that Norlene has been overpaid by $271 gross.Think about how you would respond to the following questions. After you have done so, check the Feedback for each question to compare your response.What are the options available to Norlene for repayment of the overpayment?Feedback

payment by salary deductions•repayment of the full amount to ValleyView.•

Norlene has two options when it comes to repaying overpayment:

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What will the fortnightly amount of the repayment be?•What amount will the fortnightly tax be calculated on?•What will Norlene’s net pay be?•What would be different if Norlene was repaying the overpayment in a different financial year?

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Norlene has decided to repay the 10% overpayment through future deductions from her salary.

FeedbackNorlene’s fortnightly repayment will be $27.10.•Tax will be calculated on the gross salary less the amount of the fortnightly repayment.•Norlene’s net pay will be her gross salary less the amount of the fortnightly repayment less the tax amount.

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If an overpayment occurred in a previous financial year, the repayment would be deducted from the net pay instead of the gross pay.

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t is important that payroll data is reconciled on a regular basis to ensure accuracy of wages, to detect errors or omissions and to ensure accuracy of deductions made to statutory and voluntary authorities.Automated payroll systems have their own reconciliation checks that are performed each time a pay run is processed. VAPS uses a payroll clearing account, which is reconciled on a monthly basis. This is a manual reconciliation that happens at a general ledger level. It includes checking what has been paid through the bank with the costing of the general ledger. Text version

What methods are used to reconcile payroll data? 1.Do these methods comply with recommended procedures? 2.List the method you use for identifying causes of non-reconciliation. 3.

Find out what happens in your own workplace, or, if you are not working, find out what happens in another workplace.

Post your answers to these questions to the ValleyView Meeting room, using the heading Reconcile payroll data. Read other postings and look at the different methods used when reconciling payroll data or finding data when it is not reconciled.

Payroll clearing accountThe payroll clearing account is a general ledger account that should be brought back to a zero balance. Because payroll accounts and financial accounts work on a different calendar, there may be a time difference between when salary is paid and when it is posted to the payroll clearing account. This should be taken into account when completing the reconciliation.

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Authorise payrollThe authorisation of payroll is an essential internal control requirement, minimising the risk of inaccurate payroll data being processed and confirming that payment is in line with actual work performed.All payroll transactions should be substantiated, verified and authorised by the appropriate person. The responsibility for the authorisation of payroll and pay advice slips will depend on the procedures of each organisation. Check ValleyView’s payroll procedures (located on the ValleyView Intranet) to find out who is responsible for authorising payroll at ValleyView.The person responsible for authorising ValleyView’s payroll is taking two weeks annual leave and payday will fall within that period. It is agreed that the General Manager will authorise the payroll.

What are the implications of this situation for ValleyView’s payroll staff? 1.What do you think should be done? 2.Who do you think should have been delegated responsibility for authorising payroll? 3.

Pay confirmation is required. The General Manager has been called away on urgent business and will not be returning to the office today.

Post your responses to these questions to the ValleyView Meeting room, using the topic Authorise payment. How do your responses compare?

SubstantiatedIt is important that salary calculations, including hourly rate, allowances and overtime, are substantiated to ensure the employee is entitled to the payment they are receiving.

5.2 Authorise payrollSunday, 10 April 201112:15 PM



Enquiries regarding pay-related matters might come from current or ex-employees or from outside parties such as an employee’s superannuation or health fund.

respond in an informed and positive manner•maintain a professional and confidential approach at all times•comply with privacy legislation•have a clear understanding of your level of authority•know when to forward an enquiry.•

Enquiries may be made in person, by email, fax, telephone or mail. No matter what the source and nature of the enquiry, you or your staff need to:

Knowing where to find information is a key component in being able to respond to enquiries. The first source of information should always be your organisation’s policies and procedures.

Mariella De Silva has recently started at ValleyView. Mariella advises you that she does not wish to claim the Tax Free Threshold from ValleyView. She does, however, wish to claim the dependant spouse rebate. What do you advise her?

1.

Lee Chiu asks if it is possible to reduce her taxation rate. Is this possible? What advice do you give Lee?

2.

Judi Hoffman requests information about her current leave entitlements. Is Judi entitled to this information? If so, how would you source this information?

3.

Stephanie Nutalie asks if it is possible for a portion of her pay to be credited to an overseas bank. What do you advise Stephanie?

4.

Joe Armandi asks if it is possible to have life insurance premiums deducted from his regular pay. What do you advise Joe?

5.

Answer the following enquiries detailing the sources you have used to find out the information you need. When you have finished, keep your research for your own records.

How did you go about answering these questions? Post your methods to the ValleyView Meeting room, using the topic Respond to enquiries. Read other postings under this topic and see how your methods compare to others.

5.3 Respond to enquiriesSunday, 10 April 201112:15 PM


Complete this checklist to self-assess whether you're ready to move on to another topic.

I understand the risks of not adequately checking payroll. (If not, you may need to review Check payroll.)

I understand what is involved in a payroll reconciliation. (If not, you may need to review Reconciliation.)

I understand why payroll needs to be substantiated, verified and authorised. (If not, you may need to review Authorise payroll.)

I understand that responses to payroll enquiries should be made according to organisational policies and procedures, and must comply with legislation. (If not, you may need to review Respond to enquiries.)



Declaration forms

Taxation File Number (TFN) Declaration•A TFN Declaration requests an employee to state their TFN and whether they wish to claim the tax-free threshold.Employees who do not have a TFN, or do not know it, need to obtain an application form for a TFN from the ATO (available online) and complete and lodge it immediately. An employee who does not supply their TFN will be taxed at a higher rate.New employees or employees who have not worked for the organisation for 12 months since making their declarations are required to complete a new TFN Declaration.TFN Declaration forms are available from the ATO or newsagents, or can be downloaded from the ATO website. Withholding Declaration.•

the family tax benefit•dependant spouse, zone or special tax offset•the tax-free threshold•their residency status•their accumulated HECS debt.•

Employees must provide their employer with a Withholding Declaration if they want to claim entitlement or make changes relating to:

There are two types of declaration forms that may need to be completed by an employee:

Both TFN Declaration and Withholding Declaration forms for new and existing staff have to be processed according to ATO requirements. There is information about these forms on the ATO website at www.ato.gov.au.Text versionResearch the ATO website and think about how you would respond to the following questions. After you have done so, check the Feedback to compare your response.What are the ATO requirements regarding employees claiming the tax-free threshold if employed at more than one workplace. Whose responsibility is this? FeedbackEmployees can only claim the tax-free threshold from one employer at any one time. It is generally claimed from the employer who pays the highest salary to the employee. The responsibility for claiming at one workplace rests with the employee.

What are the lodgement requirements of TFN Declaration forms? FeedbackThe original declarations are sent to the ATO within 14 days of completion. The organisation should retain a copy of the declaration for their records.

If a new employee indicates they have applied for a TFN but fail to provide the number within the next four weeks, what action is required?FeedbackThe employee has 28 days to supply a TFN during which time the tax should be deducted at the appropriate marginal rate (including the tax-free threshold). If the TFN is not supplied within the 28-day grace period, tax should be deducted at the highest marginal tax rate, commencing the first payday after the 28-day period (new employees only).If the staff member has not supplied a TFN:It is not an offence not to quote a TFN. If the staff member chooses not to provide the TFN or claim an exemption, they are entitled to, but tax must be deducted at the highest marginal rate,

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claim an exemption, they are entitled to, but tax must be deducted at the highest marginal rate, plus the Medicare levy, from any payment made to them.If the staff member has applied for a TFN:If the staff member has made an application to the ATO for a new or existing TFN, this information must be stated on the TFN Declaration form. If you have not received the TFN within 28 days, you must deduct the highest rate of tax from future payments.

What are the ATO requirements for new employees who have not given a completed TFN Declaration within 14 days of commencement? FeedbackYou must report to the ATO within 14 days any new employee who has not given your organisation a completed TFN Declaration. Your organisation reports to the ATO by providing a TFN Declaration for the relevant employee, unsigned by the employee but containing all other information available.>



health funds•superannuation funds•the ATO•authorities nominated as part of salary packaging.•

Payroll deductions may include payments to:

Details of deductions from employees’ pay need to be forwarded to the relevant authority in a timely basis.It is important that designated timelines are adhered to.

during the correct pay period•according to employee requests•in compliance with organisational policy and legislative requirements.•

This will ensure that deductions are made:

Variations to pay, such as employees going on half pay or long service leave or changing their time fraction, may necessitate a timely variation of deductions.Connor Bartlett is employed full-time as an Administrative Officer in the new multimedia operations at ValleyView. Connor has recently been ill and has used all of his paid sick leave. Connor has a periodic deduction for health insurance taken from his pay each fortnight.Connor has recently returned to work and has come to see you about a number of matters. He is concerned that his payments to the health fund are behind and he needs to make some claims for medical care. He wants to know if arrears will be deducted from his future pays and whether the amount can be reduced, as his funds are tight after being on unpaid leave for three weeks.No-one at ValleyView has experienced this type of issue before and they cannot find the answer in their own procedures.

the arrears deductions due to his period of leave without pay •the request for variation in the amount of future deductions. •

Using your own knowledge of payroll systems or procedures in a previous workplace, what would your advice to Connor be? In considering your answer you need to address the following issues:

Post your advice to Connor to the ValleyView Meeting room, using the topic Distribute payroll deductions. Read other postings on this topic and look at the different ways that people might handle this issue.

Designated timelinesEach deduction payment will have its own designated timeline. It is important, therefore, that any organisation for which there is a deduction is contacted to ascertain their timelines. Timelines for statutory deductions such as PAYG Withholding or superannuation payments are available from the ATO website at www.ato.gov.au.

6.1 Distribute payroll deductionsSunday, 10 April 201112:19 PM



www.ato.gov.au

Australian Taxation Office legislation•Employers are required to make payments for Fringe Benefits Tax, PAYG Withholding, HECS and Medicare Levy. superannuation guarantee legislation•Employers are required to pay contributions to a complying superannuation fund on behalf of each employee. The obligations under superannuation guarantee legislation are based on each financial year and must be remitted to the relevant superannuation fund by 28 July each year.As at 1 July 2002, the minimum rate was 9% of gross salary.

accident compensation legislation.•Each state has its own accident compensation legislation (although it may have a different name) and a relevant authority that administers the requirements of the Act; for example in Victoria it is known as WorkCover.Calculations to these authorities are based on an employer’s payroll, industry classification and claims history. Installments are payable monthly, quarterly, annually or in advance.

All payments to authorities required to meet payroll obligations are to be made in accordance with relevant legislation and your organisation's policy and procedures, including:

All calculations must be checked for accuracy, currency and compliance with the relevant legislation and regulations.

direct credit•direct debit•BPay®.•

The way you distribute payroll deductions will be determined by the agency to whom you are making the payment; for example, PAYG Withholding must be paid electronically by using either:

Check the ATO’s website to find out the consequences to employees and the organisation if they do not calculate and remit the correct superannuation guarantee contributions.When you have finished, check the Feedback.Feedback

the total of the employer's individual superannuation guarantee shortfalls •a nominal interest component of 10% per annum, and•an administration fee. •

According to the ATO, employers who do not remit their superannuation guarantee contributions by the required date will need to lodge a Superannuation Guarantee Statement and pay the Superannuation Guarantee Charge (SGC) by the required date. This consists of:

When the ATO receives payment of the SGC, the shortfall and interest will be redistributed in the form of a voucher to the relevant employees. These vouchers are not cheques. Your employer will also have to pay a penalty called the general interest charge (GIC) if they do not pay the SGC by the due date. The GIC rate is determined on a quarterly basis by adding 7% to the 'base interest rate’ for that day. The 'base interest rate' is defined as the monthly average yield of 90-day Bank Accepted Bills.

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6.2 Payment requirementsSunday, 10 April 201112:20 PM






PAYG Withholding is the new name for Group Tax. Withholding means the process by which an organisation deducts amounts to others and sends those amounts to the ATO.

pay an amount deducted in any period commencing Saturday and ending Tuesday on the Monday following the period

•

pay an amount in any period commencing Wednesday and ending Friday on the Thursday following the period

•

pay the total amount of their PAYG Withholding liability electronically (to pay electronically, organisations can use direct credit, direct debit or BPAY®) to the ATO on or before the due date for notification and payment.

•

The PAYG legislation classifies withholders as large, medium and small. The ATO determines how and when withholding payments are to be made according to these classifications; for example, an organisation classified as a large withholder is required to:

calculated for a business classified as small •paid to the ATO for a business classified as medium. •

Research the ATO website and explain how PAYG Withholding is:

When you have finished, post your answers and your methods for sourcing the information to the ValleyView Meeting room, using the topic PAYG Withholding. Compare your answers and sources with others posted in the Meeting room.

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PAYGPay As You Go is a single, integrated system for reporting and withholding amounts and tax on business and investment income.A payer is a person who pays and withholds amounts from payments.A payee is a person or business who receives payments from payers.

6.3 PAYG WithholdingSunday, 10 April 201112:21 PM



PAYG payment summariesPAYG Payment Summaries (formerly Group Certificates) must be issued to ALL employees who have received salary payments. This includes income earned from full-time, part-time or casual employment during the income year.

by 14 July each year •within seven days of making an eligible termination payment •in the event that a terminating employee requests that one be issued •upon request in writing from an employee.•

A payment summary must be provided to an employee by an organisation even if no tax instalments were deducted:

Prior to issuing payment summaries to employees, a reconciliation of the payroll must be completed to ensure that all data has been entered and calculated correctly.

employees and creditors •the ATO •superannuation funds •any other institutions for which employee deductions were made. •

This verifies the accuracy of payments made to:

Two copies of the Employee Payment Summary are to be given to employees. One is their tax return copy and the other is their personal record copy. Employees must retain payment summary information for five years. (The information may be stored electronically.)The payroll officer has successfully printed the payment summaries for all of ValleyView’s employees. She now realises that two employees were in receipt of taxable fringe benefits during the last financial year and that she has not entered this information into VAPS. She has already produced the transfer disk for the ATO and cleared the payroll transaction files for the current financial year.

What would your advice be? 1.How did you source the information you need? 2.

The payroll officer has come to you for help as she is unsure how to fix this problem.

Post your answers to these questions to the ValleyView Meeting room, using the heading PAYG payment summaries. Read the other postings and compare your answer. Was your advice the same? Did everyone use the same source for the answers to these questions?

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EmployeeAn employee who receives a reportable fringe benefits amount cannot be issued with a payment summary until the end of the financial year.

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Generally, reconciliation will involve comparing taxation and superannuation totals recorded in the payroll data with the taxation and superannuation total recorded in the general ledger.

6.4 PAYG payment summariesSunday, 10 April 201112:22 PM




Complete this checklist to self-assess whether you’re ready to move to another topic.

I understand the Australian Tax Office requirements for processing taxation declaration forms. (If not, you may need to review Declaration forms.)

I am aware of the types of payroll deductions and the importance of ensuring that deductions are processed within designated timelines. (If not, you may need to review Distribute payroll deductions.)

I understand payroll obligations to authorities must be made according to organisation and legislative requirements. (If not, you may need to review Payments required.)

I understand an employer's responsibilities in processing PAYG withholding. (If not, you may need to review PAYG Withholding.)

I understand when employee payment summaries must be provided to employees. (If not, you may need to review Employee payment summaries.)



ValleyView is a fictional publishing company which specialises in producing Australian regional tourist guides. You can get more information about how ValleyView works in two different ways.

ValleyView IntranetContains company policies and procedures, marketing materials, project reports, templates and staff development resources.ValleyView WebsiteContains a company profile, mission statement, product list, contact information and job opportunities.

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7 ValleyViewSunday, 10 April 201112:23 PM

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