This article explains how to configure allowance pay codes that require thresholds so only the correct portion of the allowance is treated as taxable. You will use the Allowance tab on the Pay Code screen to define and maintain threshold values over time for amount- and quantity-based allowances.
Configure Allowance Pay Code Thresholds
Understand When Allowance Thresholds Are Required
Make sure the pay code has a Pay Code Type of Allowance and is assigned to Australia or New Zealand.
Confirm that the allowance is partially taxable based on either the amount paid or the quantity paid.
If the allowance is partially taxable, set the Tax Type on the pay code to one of the following:
Amount Threshold if tax is based on the total allowance amount.
Quantity Threshold if tax is based on the allowance quantity.
Use the following rules for threshold-based allowances:
Amounts or quantities up to the threshold are non-taxable.
Amounts or quantities above the threshold are taxable.
📌 Note: Threshold values can change over time, so you can define multiple validity periods, each with its own threshold value.
Example of an Amount Threshold
Assume the allowance Tax Type is Amount Threshold.
Set the Threshold Value to $1,000.00.
If a payee receives $1,500.00 for this allowance during the tax year:
$1,000.00 is treated as non-taxable.
$500.00 is treated as taxable.
📌 Note: The same concept applies to Quantity Threshold allowances, but the threshold is based on quantity instead of amount.
Define an Allowance Threshold
Go to Rates and Rules, then click Maintenance.
Click Pay Code, then open the allowance pay code you want to configure.
Click the Allowance tab.
In the Threshold field grouping, click Add +. A new blank row is added.
In the first date field, click the calendar icon, then select the start date for when the threshold takes effect.
In the second date field, click the calendar icon, then select the end date for when the threshold stops applying.
Leave this field blank if the threshold should remain effective indefinitely.
If you plan to define multiple threshold periods, you must enter an end date for each earlier period.
In the Threshold Value field, enter one of the following:
The amount if the Tax Type is Amount Threshold.
The quantity if the Tax Type is Quantity Threshold.
Click Save (or the relevant save option) to apply the changes.
Repeat steps 4–8 to add additional threshold values for different validity periods, if required.