1. Non-Smoothing Method
The Non-Smoothing tax method enables the calculation of taxes on a month-to-month (pay cycle to pay cycle) basis. This method is non-cumulative.
Please note the following in this method:
Statutory Income = Gross Pay (Taxable) - NIS and Approved Superannuation or Pension
Taxable Income = Statutory Income (SI) - Tax Threshold
Cycle PAYE = Taxable Income * Tax Liabilities (25% and 30%)
2. Smoothing Method
The Smoothing tax method enables the calculation of taxes on a year-to-date (cumulative) basis.
Please note the following in this method:
Statutory Income (SI) = Gross Pay YTD (Taxable) - NIS YTD and Approved Superannuation or Pension YTD
Taxable Income YTD = Statutory Income YTD (SI) - Tax Threshold YTD
PAYE YTD = Taxable Income YTD * Tax Liability (25% or 30%)
Cycle PAYE = Prior PAYE YTD - Current PAYE YTD
3. Setup Configuration
Create/select Pay Group. Select the desired Tax Method. Save. How do I set up Pay Groups?
Payroll>>Maintenance>>Payroll Setup>>Pay Groups
4. FAQs
1. Can we change from the Smoothing to the Non-Smoothing method during a calendar year?
Yes. The calculations will just switch to a per cycle basis.
2. Can we change from the Non-Smoothing to the Smoothing method during a calendar year?
No. This would be complicated as the system would look at the Year-to-Date values. As such, employees may have to pay higher taxes or get a refund.
3. If we are using one method during a calendar year, and wish to switch tax methods at the start of cycle 1 in the new calendar year, can this be done?
Yes. There is no implication. However, all cycles must be archived and the end of year procedures completed.