Deduction categories: classification options defined

When reporting employee earnings to the Australian Tax Office (ATO) whether via a payment summary, annual report or through Single Touch Payroll (STP), you must assign certain deductions to specific classifications so they are itemised as per ATO specifications. You can find instructions on how to map a classification to a deduction category here.

Important

If none of the below options describe the intended use of the deduction category, select the Default classifications. To make sure you are reporting employee earnings correctly through STP, you should not classify pre-tax deductions using the Default option. Rather, you should assign it to the appropriate salary sacrifice deduction classifications.

Child support deduction

It is a deduction made under a notice as per section 45 of the Child Support (Registration and Collection) Act 1988. Select this classification only if you are reporting via STP and want an employee's child support deduction amount reported via STP every pay run. It would replace providing a separate declaration to the Child Support Registrar.

To be clear, if you are reporting via STP but prefer to manually send monthly reports to the Child Support Registrar then do not assign this classification, rather you would assign the Default classification. Additionally, take note that these deduction amounts will only begin being reported through STP upon the commencement of STP Phase two reporting, being 1st January 2022. 

Child support garnishee

It is a deduction made under a notice as per section 72A of the Child Support (Registration and Collection) Act 1988. Select this classification only if you are reporting via STP and want an employee's child support garnishee amount reported via STP every pay run. It would replace providing a separate declaration to the Child Support Registrar.

To be clear, if you are reporting via STP but prefer to manually send monthly reports to the Child Support Registrar then do not assign this classification, rather you would assign the Default classification. Additionally, take note that these deduction amounts will only begin being reported through STP upon the commencement of STP Phase two reporting, being 1st January 2022. 

Salary sacrifice (other employee benefits)

It refers to an effective salary sacrifice arrangement, entered into before the work is performed, for benefits other than for superannuation, where the sacrificed salary is permanently foregone. Examples include:

  • Car.
  • Novated lease.
  • Gym membership.
  • Workplace giving donations.
  • Property for example goods, land, buildings, shares, and bonds.
  • Expense payments for example loans, school fees, childcare costs, and home phone costs
  • Work-related items such as portable electronic devices and equipment.

Salary sacrifice (superannuation)

It refers to an effective salary sacrifice arrangement, entered into before the work is performed. Where you pay contributions to a complying superannuation fund, whereby the sacrificed salary is permanently foregone.

Union or professional association fees

Any amounts paid as union fees, subscriptions to trade, business or professional associations, bargaining agent's fees to a union for negotiations in relation to a new enterprise agreement/award for your employees.

Workplace giving

Any workplace giving program donation amounts paid to charities or organisations that are entitled to receive tax-deductible donations. The classification only pertains to post-tax deductions. Refer to the ATO website for further information on how you should deduct workplace giving donations from an employee's pay.

If you have any questions or feedback, please let us know via support@yourpayroll.com.au.

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