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Sunday, 10 November 2013

Child support payments for employees / contractors

Child Support payments may be made various ways, commonly through payroll. If an employer is asked to make payments to the Child Support Agency (via the Department of Human Services) on behalf of an employee, then the employer is legally obliged to deduct payments from the employee’s wages. This may also apply to subcontractors.


DHS has two types of payments according to the status of the employee:
1.   Section 72A Notice is based on a given cents per $ rate, & there is no protected earnings amount. This is typically used for casual, contract or seasonal workers. The amount is deducted from the GROSS wage & then the wage is taxed.

2.   Payment Schedule which is a specific amount to be paid per pay period as notified by DHS. This amount does not change unless notified by DHS. The payment is deducted from the NET wage. Used for permanent or regular casual employees whose income tends to vary little or not at all.

The employer must take care of the protected earnings amount, currently set at $333.53 per week. Generally with this method the amount instructed by DHS will preserve the protected earnings amount, however if the worker’s earnings varies for any reason it is up to the employer to preserve this amount.


Section 72A Payroll Setup
 
1.   Set up a new wage category in the Deductions section, called Child Support Payments. Set up a liability account for the CSA payments.

                            i.       Setup the deduction as a percentage rate & exempt the category from PAYG Withholding.

                          ii.       Link the category to the relevant employee

                         iii.       Select “show on pay slip”

                         iv.       Exclude from Superannuation Guarantee calculation.

2.   Set up a liability account for the CSA payments

3.   Link the expense account (deduction category wages expense) to the liability account.

4.   Process the payroll.

5.   Either set up an automatic payment from the business bank account to Child Support Agency or process with other electronic payments
 
 
Payment Schedule Payroll Setup

1.   Set up a new wage category in the Deductions section, called Child Support Payments.Set up a liability account for the CSA payments.

                            i.  Setup the category as a fixed dollar amount per pay period as notified by DHS.

                          ii.   Link the category to the relevant employee

                         iii.   Select “show on pay slip”

                         iv.   Exclude from Superannuation Guarantee calculation.

2.   Set up a liability account for the CSA payments

3.   Link the expense account (deduction category wages expense) to the liability account.

4.   If you need to set up Protected Earnings:

5.   Process the payroll.

                            i.    Set up a Wages Category called CSA Protected Earnings

                          ii.    Create the category as a fixed amount set at the current Protected Earnings amount of $333.53

                         iii.    In the standard pay details, adjust the wage amount to reflect the total less the protected Earnings amount

6.    Link the category to the relevant employee

7.   Check that entitlements & superannuation are accruing correctly. 

8.   Process the payroll

9.   Either set up an automatic payment from the business bank account to Child Support Agency or process with other electronic payments.


End-of-year Payment Summary
Child Support deduction is to be detailed on the payment summary in the deduction fields. Within the payment summary setup, link the child support deduction wage category to one of the Deductions fields, listing Child Support Agency in the Description field, so it will appear separately on the Payment Summary.

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