Salary Sacrifice

Salary sacrifice is an arrangement where an employee agrees to forego part of their future salary or wages in return for their employer providing benefits of a similar value. Most commonly, these benefits are in the form of additional superannuation contributions but not always.

Please consult your tax accountant or the ATO for further information.

How to set up a salary sacrifice (other than Superannuation)

There are instances where an employee may salary sacrifice some of their gross pay to something other than superannuation, for example a novated car lease.

Setting Up a Salary Sacrifice (Non-Superannuation)

Check that your system has a Deduction setup for Salary Sacrifice and that the Payroll Liability Account is setup correctly.

Select System > Deductions from the menu toolbar and ensure there is a deduction called Salary Sacrifice - Other and that it is setup as 'Before Tax'.

If there isn't one, click on the Add icon and add one like this.

Ensure it is set to be Applied Before Tax and the checkbox for Include in Superannuation is not ticked.

Select 'N/A' for Payment Summary location.

Select System > Payroll Liability Accounts from the menu toolbar and ensure there is one available for the salary sacrifice you are about to add to the employee (in this example I have used 'Car Lease' for a novated car lease).

If not, click on the Add icon to add one and point it to GL Liability Account where you would like the deductions to be posted (or you could select Trade Creditors and the supplier to whom the deductions will be paid).

Adding the Deduction to an Employee

In Employee Maintenance, open the employee and select the Pay Details tab.

Beneath the Deductions section, click on the Add button to add a new deduction for the employee.

In the Deduction field select Salary Sacrifice - Other (as opposed to Salary Sacrifice - Super).

In the Liability Account field select the Payroll Liability Account that you set up for this deduction (e.g. Car Lease).

Enter the GL Expense Code you wish the amount to go to in the GL (e.g. Salaries & Wages).

Enter the amount to be deducted each pay, then Save.

From now on, each time a normal Pay run is processed, the nominated amount will be deducted from the employee's gross pay and added to the chosen Liability account or Supplier in the GL for payment to the relevant company.