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Create a provision for tax on bonus

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Summary

How to create a provision definition for tax on bonus in Sage 300 People.

Description

A provision for tax on bonus spreads the estimated bonus tax across the remaining pay periods in the tax year.

 This helps distribute the tax impact before paying the bonus.

The system recalculates the provision amount whenever the estimated bonus value changes. In the final tax period, the system adjusts the tax to account for any over- or under-provision.

Resolution

Access the provision definition setup screen

  1. From the Navigation pane.
  2. Expand Company Management and expand Payroll Definitions.
  3. Double-click Provisions.
  4. Click New. 
  5. Complete the provision definition fields.
  6. Select the applicable Provision Type. 
  7. Link the required Pay Runs.
  8. Link a custom calculation, if required.
  9. Click Save.

Understand the calculation formula

Provision for Tax on Bonus =
(Estimated Bonus – Year-to-date provision amount) ÷ Remaining periods in the tax year

  • Estimated Bonus: Select the field where the amount is specified (for example, for a 13th cheque use [EE.ER.PeriodSalary])
  • Year-to-date provision: Use PS.PV.CODE.PROV_TAX_BONUS.YTDTotal
  • Remaining periods: Use (DateDiffPeriod([PR.EndDate], [EE.ER.AddDate1]) + 1)

Examples

  • Example A: The employee earns R6,000 monthly and expects a R6,000 bonus in December.
    Calculation: R6,000 ÷ 12 = R500 provision per month.
  • Example B: The employee starts in June and expects a R4,500 bonus in December.
    Calculation: R4,500 ÷ 9 = R500 provision per month.
  • Example C: Estimated bonus changed from R6,000 to R9,000 in September.
    Calculation: (R9,000 – R3,000) ÷ 6 = R1,000 provision per month.

NOTE:

Revise the provision regularly to ensure the bonus amount equals the provision in the last tax period.