Table of Contents

Tax Scales

To support STP 2, we have created a new set of tax scales. These replace  the previous set of Tax Scales (1, 2, 3, 4 etc.).

• tax scales are now 4 characters
• they are derived from a new ATO field called the Tax Treatment Category

Why?

As part of STP 2 the ATO released a new field - Tax Treatment Category, which is a 6 character code with each character representing a classification of the Payee (Employee).  This new code must be populated and reported to the ATO.

Four of these characters capture information previously captured in Synergetic by Tax Scale, Tax Free Threshold Claimed and HELP/SSL or TSL debt.  The synthesis of these fields into the new set of 4 character tax scales was an efficient and elegant solution to populating 4 of the 6 Tax Treatment Category codes.

Tax Treatment Category

The ATO defines Tax Treatment Code as – the structured code that represents the components of PAYGW that have been applied by the payer to the payees’ payments subject to withholding.  

The best way to understand it is to look at it's 6 components

1. Category
2. Options
3. STSL
4. Medicare Levy
5. Medicare Levy Exemption
6. Medicare Levy Reduction

and what they are.

This is shown in the table below.

Note: The possible values for Characters 2 - 6 are dependant upon the value of Category (Character 1).  Each Category code has it's own set of allowed values for the other 5 Characters (2 - 6) .  

Thus there is a large set of allowed 6 character Tax Treatment codes.  An example of these for each Category is:

Note: Many Tax Treatment Categories will contain the same unique Synergetic Tax Scale, eg:

RTSX exists in all the the Tax Treatment Categories:

• • • RTSXXX
    • RTS#XX
    • RTSXX0
    • RTSXX#
    • RTSXXA

New Tax Scales

The set of new Synergetic Tax Scale are all of the unique combinations of the Tax Treatment Category Characters 1, 2, 3, and 5 extracted from the full Tax Treatment Category value set:

• Char 1 - Category of Tax Scale 
• Char 2 - Options
• Char 3 - Study Training Support Loans
• Char 5 - Medicare Levy Exemption

Tax Scales can be seen at Payroll Configuration - Tax Rates tab

Mapping of Tax Scales Old to New

The mapping of old to new Tax Scales is:

with cte_tax AS
(
    select 
        tr.Code as TaxScale,
        t.TaxHECSFlag
    from finance.luPayrollTaxationRate tr
      cross join (select 0 as TaxHECSFlag UNION select 1) as t
    where ActiveFlag = 0
),
cte_converted as
(
select pe.*, NewTaxScale = ISNULL(
          (
              SELECT
                  tr.Code
              FROM finance.luPayrollTaxationRate tr
              WHERE tr.LegacyTaxScaleIncHELP = pe.TaxScale
                OR 
                (
                    tr.LegacyTaxScale = pe.TaxScale
                    AND tr.LegacyTaxHELPFlag = pe.TaxHECSFlag
                )
        
          ), pe.TaxScale)
    FROM cte_tax pe
)
select * from cte_converted c
where c.NewTaxScale <> c.TaxScale
  and
  (
      c.TaxHECSFlag = 0
      or 
      (
          c.TaxHECSFlag = 1
          and not exists
              (
                  select * from cte_converted c2 where c2.TaxScale = c.TaxScale and c2.TaxHECSFlag = 0 and c2.NewTaxScale = c.NewTaxScale
              )
      )
  )
order by c.TaxScale, c.TaxHECSFlag

Creating the Tax Treatment Category

When reporting to the ATO,  the STP 2  process takes the Tax Scale and adds Characters 4 (Medicare Levy Exemption) and 6 (Medicare Levy Reduction) to create the Tax Treatment Category to report.

This is shown on the Payroll Employee Maintenance > Tax tab

Explanatory Video

Tax Scale Video (Edited) 20220505.mp4

Reduction in Tax for 'Tax Scale 1 or 2 with HELP' and Salary Sacrificed Super post STP 2

Any Payee who salary sacrifices super and was Tax Scale 1 with HELP, or Tax Scale 2 with HELP and is now RNSX or RTSX will have a reduced Tax amount.

This is because:

Tax Scale 1 with HELP, or Tax Scale 2 with HELP calculated Tax based on income less salary sacrificed super, and HELP on the full income (ie not less salary sacrificed super)

the new four character based Tax Scales calculates Tax and HELP based on income less salary sacrificed super.

eg 'Tax Scale 2 with HELP' pre STP 2 calculates Tax based on income less salary sacrificed super and HELP based on full income

income                                =   $3,000
salary sacrificed super         = - $500
tax calculated on $2,500     =   $598
HELP calculated on $3,000  =   $150
Total Tax                               =   $648

eg 'Tax Scale 2 RTSX - STP 2 calculates Tax and HELP based on income less salary sacrificed super

income                                =    $3,000
salary sacrificed super         = - $500
tax calculated on $2,5000    =   $498
HELP calculated on $2,500  =    $88
Total Tax                               =   $586

Note: Tax Scales S1 and S2 are not affected as these incorporate HELP payment. They have always calculated on the reduced gross amount and will return an exact match with RNSX and RTSX respectively.

Explanatory Video

TaxCalcVariationExplained.wmv