The calculation of the PAYG withholding for an employee taking annual leave depends on the method by which the employees choose to be paid whilst on leave.
When paid in advance for the full period of leave, it is necessary to calculate tax on one weeks leave and multiply the result by the number of weeks leave taken.
In this example the employee is being paid for a regular working week plus 4 weeks of leave.
|Pay for week worked||
|Annual leave, paid in advance||4 x800||
Below is a summary table:
(no HELP or Tax offsets)
|Leave Loading||3200 x 17.5% =||560.00|
|Taxable leave loading||560.00 – 320.00 =||240.00|
|Taxable holiday pay||3200.00 + 240.00 =||3440.00|
|Tax on one week holiday pay||3440.00 / 4 =||860.00||153.00|
|Tax on 4 weeks holiday pay||153.00 x 4 =||612.00|
|Pay Slip Information|
|Gross Pay||Tax||Net Pay|
Note: Any other deductions are multiplied by the number of weeks leave and normal week and withheld.
Once the calculation is complete you should record the above pay in the general journal and cash payments journal as shown below.
|Holiday Leave Accrual||
|Wages for the week ending xx/xx/xx|
|Superannuation calculation on normal earnings.|
Note: Leave loading is exempt from Superannuation Guarantee Contributions (SGC). For further detail see the Superannuation Guarantee Ruling SGR94/4 and SGR 94/5. law.ato.gov.au