Step 6: Setting Thresholds and Rounding Rules

In this step of the Company Creation Wizard you will set thresholds and rounding rules used in various calculations throughout the system. At this step, you can also update the current tax scales for this company if required. Tax scales and thresholds may vary from one financial year to the next and you should always ensure that you are using the most up-to-date scales and information.

ClosedSetting the thresholds:

This is an optional stage in the company set up and can also be completed at a later stage by entering Financial Years. However, if you do want to complete this threshold information at this point you must enter the following information:

Field Name Explanation
Thresholds and Rounding Rules
Financial Year Ending This will default to the financial year you have created at Step 5.
Set this Year as Current Financial Year Select if the year is the financial year in which you are currently working.
Lock This Year for Payroll Processing Select if you want to ensure that no more payruns are processed as part of this year.
Annual Leave Loading Tax Free Threshold This is the upper threshold for non-taxable leave loading. At time of payment, payroll will automatically tax an employee's leave loading only when their YTD leave loading earnings exceed this limit
E.T.P Lower Cap Amount This value is the 'low rate' threshold for an ETP payment a person may receive on termination. A lower tax rate applies to this portion, and can only be applied in certain cases. For further information on any of these thresholds, please refer to the ATO website at www.ato.gov.au.
E.T.P Upper Cap Amount This value is the upper rate threshold for an ETP payment for which a higher tax rate applies. For further information on any of these thresholds, please refer to the ATO website at www.ato.gov.au.
Whole of Income Cap The whole-of-income cap at July 1, 2015 is $180,000 minus other taxable income you earn throughout the income year. The taxable component of your ETP is taxed based on your age up to your whole-of-income cap. ETP amounts over the whole-of-income cap are taxed at the top marginal tax rate.
Lump Sum D - Year 1 Threshold This is the base limit for the tax free portion of an ETP payable on redundancy, regardless of how long the employee has been working with the company.
Lump Sum D - Subsequent Years This is the tax free threshold per completed years of service for redundancy payments.
Round Tax Withheld to (cents) To round tax to the nearest dollar, enter 100 in this field. This is the recommended option, as the ATO require that tax is submitted to the nearest dollar.
Round Net Pay to (cents) If you have rounded tax to the nearest dollar, you must round net pay to the nearest cent. Enter 1 in this field.
Max PAYG % for bonus, backpay, commission The ATO specifies a maximum tax rate for these lump sum payments. This maximum rate is referred to as the 'Withholding limit' (49% is current for the 2015 tax year).
Flood Levy This item is no longer relevant.
Superannuation Thresholds
Employer SGC Base Contribution (%): This is the minimum superannuation guarantee contribution (SGC) that an employer can make on behalf of their employees. New super funds and employee super pay items default to this value.
SGC Minimum Monthly Earnings Threshold: This is the monthly earnings threshold which an employee must exceed before a super contribution is calculated. See earnings thresholds for more information
SGC Maximum Annual Earnings Threshold This is the legal maximum earnings base on which an employer is obliged to calculate super. When an employee's YTD gross earnings reach this amount, payroll will no longer calculate a base employer contribution.
No Maximum Threshold Specified Select this option if you wish to ignore this threshold for all employees.
Use Annual SGC Threshold Select this option if you wish to use the employee's Annual SGC Threshold as the maximum earnings base for calculating super.
Use Quarterly SGC Threshold Select this option if you wish to use the employee's Quarterly SGC Threshold to calculate the maximum earnings base for each quarter.
ClosedSetting the Rounding Rules:

This stage is mandatory and you will not be able to continue onto the next step until you have entered this information.

To set the rounding rules:

  1. Round tax withheld to (cents)
    To round tax to the nearest dollar, enter 100 in this field. This is the recommended option, as the ATO require that tax is submitted to the nearest dollar.
  2. Round net pay to (cents)
    If you have rounded tax to the nearest dollar, you must round net pay to the nearest cent. Enter 1 in this field.

Any amounts rounded off tax are added onto net pay, and vice versa. Rounding both tax and net pay by other than the recommended settings may result in errors on your payroll.

  1. Once you have entered all the information required, click Next.
    A message will appear telling you the most recent tax scales that have been installed on the system and asking if you would like to install any newer versions by downloading them from the HR3 website.
  2. If you want to install a more recent set of tax scales, click Yes.

If your tax scales are not found in the system, you can skip this step for the moment. After the company has been created, you can download the latest tax scales from our website www.HR3.com.au, then install them using the tax scales wizard.