This article details how to set up and report an employee's child support deductions and garnishees. It details the current reporting method along with the changes to reporting options when STP phase 2 is introduced on 1 January 2022.
Currently, employers are required to report child support deductions and garnishees via a monthly report to the child support registrar. However, when STP phase 2 is introduced on 1 January 2022, employers will also be able to report child support deductions and garnishees via their STP report to the ATO. This eliminates the need for the employer to send multiple reports to multiple agencies.
To be clear, once reporting child support deductions does become available via STP Phase 2, this process will still be voluntary.
In preparation to include child support and garnishees in an STP event, we now include two platform deductions for child support when you create a new business as of 18/02/2021.
- Child support deduction: This is a deduction made under a notice as per section 45 of the Child Support (Registration and Collection) Act 1988. Select this only if you are reporting via STP and want an employee's child support deduction amount to be reported via STP every pay run, in lieu of 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 2 reporting, being 1 January 2022.
- Child support garnishee: This is a deduction made under a notice as per section 72A of the Child Support (Registration and Collection) Act 1988. Select this only if you are reporting via STP and want an employee's child support garnishee amount to be reported via STP every pay run, in lieu of 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 2 reporting, being 1 January 2022.
These deduction categories cannot be deleted or edited.
NB: The above deduction categories will not be added to existing businesses. The reason being that they are not commonly used deductions and in doing so would add unnecessary categories. Furthermore, existing businesses may already have these categories, so there is no need for duplication.
Deduction and reporting process for new businesses created after 18/02/2021
Please see below for instructions on the 2 methods of reporting that apply to businesses created after 18/2/2021:
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Reporting via a monthly report to the child support registrar
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Reporting via STP from 1 January 2022
Reporting via a monthly report to the child support registrar
If you are wanting to report child support deductions direct to the child support registrar, and have created a business after 18 February 2021, you will need to create a new deduction for the child support deduction or garnishee (differentiating the name from the platform deduction name) and set the classification to Default. Setting the classification to Default will ensure the deduction is not included in the STP reporting.
Once the deduction is set up you will need to include the deduction in a pay run by setting up a recurring deduction via the employees pay run inclusions page or manually adding the deduction to the pay run via the Actions button.
Finally, users can run a deductions report, to assist them in completing the monthly report for the child support registrar.
Reporting via STP from 1 January 2022
If you are wanting to report child support deductions via STP, and have created a business after 18/02/2021, you will have the new platform categories included in the deductions list. The deduction name, type and classification will not be editable in order to keep the deduction categories correct for STP reporting purposes. The classification is set up as 'Child deduction' or 'Child support garnishee', and this is what the platform uses to identify the deduction in the STP report. Please note that this is the correct set-up if you wish to report via STP from the commencement of STP phase 2 on the 1 January 2022.
Once the deduction is set up you will need to include the deduction in a pay run by setting up a recurring deduction via the employees pay run inclusions page or manually adding the deduction to the pay run via the Actions button.
From here, users will need to continue to report via a monthly report to the child support registrar up until the commencement of STP Phase 2. Then, from the commencement of STP Phase 2, the deductions will be included in the STP report sent to the ATO, thus eliminating the need to report a monthly report to the child support registrar.
Deduction and reporting process for existing businesses created prior to 18/02/2021
Please see below for instructions on the 2 methods of reporting that apply to businesses created prior to 18/2/2021:
-
Reporting via a monthly report to the child support registrar
-
Reporting via STP from 1 January 2022
Reporting via a monthly report to the child support registrar
If you want to report child support deductions directly to the child support registrar, and have created a business prior to 18/02/2021. You can use the existing child support deduction categories (or set one up if you do not have one), ensuring that the classification is set to Default. Setting the classification to Default will ensure the deduction is not included in the STP reporting.
Once the deduction is set up you will need to include the deduction in a pay run by setting up a recurring deduction via the employees pay run inclusions page or manually adding the deduction to the pay run via the Actions button.
Finally, users can run a deductions report, to assist them in completing the monthly report for the child support registrar.
Reporting via STP from 1 January 2022
If you are wanting to report child support deductions via STP, and have created a business before 18 February 2021, you will need to create new child support deductions and set up the relevant classification, either Child deduction or Child support garnishee.
Once the deduction is set up you will need to include the deduction in a pay run by setting up a recurring deduction via the employees pay run inclusions page or manually adding the deduction to the pay run via the Actions button.
From here, users will need to continue to report via a monthly report to the child support registrar up until the commencement of STP phase 2. Then, from the commencement of STP Phase 2, the deductions will be included in the STP report sent to the ATO, thus eliminating the need to report a monthly report to the child support registrar.
Setting up a child support recurring deduction
- Go to the employees pay run inclusions page.
- On the far right of the deduction section, click on the Add button.
- Select the appropriate deduction category from the drop-down list.
- Enter the deduction amount to be applied per pay run. It can be a 'Fixed amount', a 'Percentage of Gross earnings', a 'Percentage of OTE' or a 'Percentage of NET'.
- Select whether the deduction should be paid manually or to a bank account.
- To pay this deduction directly into another bank account, via the ABA file from the pay run, you will need to have first set up the bank account on the employee's record/bank accounts page (set the amount to pay as Fixed and $0) so you can choose this bank account from the drop-down list, and you can add a 'reference' in the Payment Reference field.
- To pay this deduction via BPAY file from the pay run, you will need to have set up BPAY files in Payroll Settings.
N.B. Regarding journal mapping, if you set up a deduction to be paid directly to a bank account, it is not considered a liability (because it has already been paid over) so it will go to payroll clearing. If you want the journal entry to be a debit, not a credit, then you need to use an Expense account in the chart of accounts. Please note - Child Support Agency (CSA) deductions require the employee's reference number to be entered in the Payment Reference field (when you set up the deduction on the employee's pay run inclusions page).
- Select whether you want to apply preserved earnings to this deduction.
- Enter any notes if you want the employee to see them on their pay slip.
- Enter the date this deduction is to commence.
- Choose when this inclusion should cease (a specific end date, never or once a particular dollar amount has been reached).
- Click Save.
Now, the next time you process pay run that includes this employee, the deduction will automatically appear:
Manually adding a child support deduction to a pay run
- In the unfinalised pay run, click on the employee that you wish to add a deduction for to expand their pay run details.
- From the Actions button in the bottom right corner, click Make a Deduction.
- Select the child support deduction category from the drop-down list.
- Select the payment option.
- Add any notes if you want the employee to see them on their pay slip.
- Add the deduction amount.
- Click Save.