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Payroll – Tax Free Threshold With/Without Leave Loading – Which Do I Use?
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Published on Monday, 26 May 2014 10:32
Client emailed with the following query – I need help taking over a payroll for a business – I’m setting up a new employee but with all the choices for tax in the software, I wondered if a Tax-Free Threshold + Leave Loading applies to a full time employee who is entitled to annual leave? Or is it Tax-Free Threshold + No Leave Loading? Does No Leave Loading apply to casual staff who are not entitled to annual leave? I see the No Leave Loading in the Tax rate list. I have been manually calculating a PAYG from the ATO tax tables. When I referred back to another employee tax rate, they were classified as + leave loading. But so are casuals. Can you help?
Explanation – Leave loading is 17.5% ON TOP of annual leave (was introduced in the war time to average what a worker got in overtime, so they received similar while on holidays)
Whether you select a threshold with or without the leave loading depends on the Modern Award applicable for your business/industry.
And it applies to part-time and full-timers, NOT casuals at all. For example, if you are in Retail, leave loading IS in the Retail Award – so YES – a Tax-Free Threshold + Leave Loading applies to a full time employee who is entitled to annual leave. If the award did not enforce/include leave loading, you would select Tax-Free Threshold + No Leave Loading. All your staff will be Tax-Free Threshold + Leave Loading. For Casuals, you just don’t choose the Leave and Leave-Loading Categories in their payroll set up, at all.
For more on leave loading, see also -
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