This article explains what deduction headers control, when you need to create them, and which deduction settings can apply over time. Use this information to make sure deductions are configured correctly before you add them to individual payee records.
Maintain Deduction Headers
Create a deduction header for each type of deduction that can apply to a payee.
Use the deduction header to define the core behaviour of the deduction, including:
The deduction type.
The order in which the deduction is applied.
The bank account details the deduction is paid to for electronic funds transfer.
Whether the deduction is itemised on payslips.
The default rate of deduction.
Whether the deduction is itemised in Single Touch Payroll reporting for AU Payroll.
Child support protected earnings for AU and UK Payroll.
Set up one or more deduction settings records for the deduction header. Each set of deduction settings has its own validity period, so different settings can apply at different times.
Check the pay period end date of the pay batch, as the system uses this date to determine which deduction settings apply.
Deduction Types
The deduction type identifies the purpose of the deduction. The available deduction types vary by payroll country.
AU Payroll | NZ Payroll | UK Payroll |
Standard | Standard | Standard |
Child Support | SLBOR (Student Loan Voluntary Extra Deduction) | Attachment of Earnings Order Priority |
Child Support Rolling | Extra Tax | Council Tax |
Payee Super | Payee KiwiSaver | Deduction from Earnings (Child Support) |
Extra Tax | Work & Income | Scottish Earnings Arrestment Order |
Workplace Giving | Payroll Donations | Current Maintenance Arrestment |
Union / Professional Association Fees | Child Support | Direct Earnings Attachment |
| Arrears Payments | Direct Earnings Attachment Higher Rate |
|
| Pension |
|
| AVC |
📌 Note: In NZ Payroll, use the Arrears Payments deduction type for deductions in arrears requested by the IRD. This can apply to child support, tax, student loan repayments, or family tax credit overpayments.
Create a separate deduction header for each arrears payment type in NZ Payroll, and name each header clearly so reporting stays accurate. For example, use Child Support Arrears to identify a deduction header for child support arrears.
Configure Deduction Settings
Each deduction header must have at least one set of deduction settings.
Add a deduction settings record for the deduction header.
Enter the validity period for the settings.
Configure the settings that apply to the deduction header.
Closed Deduction Applied to Adjustments
Enable this option if an expired deduction linked to the deduction header must still be included in an adjustment pay batch, provided the deduction was valid during the period being adjusted.
For example, this can apply when an adjustment to prior earnings changes the amount that should have been deducted for that earlier period.
GST / VAT
Enable this option if Goods and Services Tax, or an equivalent value-added tax, must be applied to deductions linked to the deduction header when the deduction is provided as a service to company contractors.
Payroll Giving Tax Credit
This option applies to NZ Payroll.
Enable this option if deductions linked to the deduction header are eligible for a tax credit.
For example, a payee may donate to a charitable organisation through direct deductions under the payroll giving scheme. When this option is enabled, the system calculates the tax credit during the Tax stage of the pay batch and applies it to the payee’s PAYE amount.
The tax credit is calculated by multiplying the deduction amount by the applicable tax credit percentage.
Example:
Deduction amount: $20.00
Tax credit percentage: 33.3333%
Tax credit: $6.66
If the system calculates PAYE as $200.00, it subtracts the $6.66 tax credit, resulting in a reduced PAYE amount of $193.34.
Deductible Service Fee
Enable this option if the deduction must be itemised on a deductible service fee invoice.
For more information, see Configure document formats.
Gross Earnings Pay Code Group
Select a gross earnings pay code group if the deduction is based on a percentage of gross earnings and must only use a defined subset of earnings.
For example, use this when a statutory deduction must be calculated on ordinary time earnings only, rather than on overtime or allowances.
The following rules apply:
It applies when the deduction is based on a percentage of gross earnings.
It is ignored if the deduction uses a fixed amount per period.
It is ignored if the deduction is taken from net earnings.
📌 Note: If you do not select a gross earnings pay code group, any linked payee gross deductions based on a percentage of gross earnings are calculated on all gross earnings except reimbursements.
RESC
This option applies to AU Payroll and is available only when the deduction type is Payee Super.
Enable this option if linked payee deductions represent Reportable Employer Superannuation Contributions that exceed the legislated Superannuation Guarantee contribution amount.
Use this option for salary sacrifice superannuation deductions rather than deductions that contribute toward the SG amount.
📌 Note: You can override the RESC flag on individual payee deductions linked to the deduction header.
Reduce Superable Salary
This option applies to AU Payroll.
Enable this option if amounts deducted through linked payee deductions must reduce the earnings amount used to calculate the Superannuation Guarantee amount.
For example, this may apply where a payee has a salary sacrifice arrangement and the employer contributes SG based on reduced earnings after gross deductions.
⚠️ Important: The Treasury Laws Amendment (2019 Tax Integrity and Other Measures No. 1) Bill 2019 took effect from 1 July 2020. It is recommended that this option is not used from that date onward.
Child Support Protected Earnings
This option applies to AU Payroll and NZ Payroll and is mandatory for deduction headers with a deduction type of Child Support.
Set the protected rate type as either a percentage or a fixed amount of net earnings.
Enter the protected rate value.
Save the settings so the system can protect the required minimum net earnings.
The protected rate determines how much of a payee’s net earnings must remain after the child support deduction is applied. The system will not deduct child support in a pay period if the deduction would reduce earnings below the protected amount.
Default Rate Value
Use the default rate settings if the same deduction rate applies to many payees.
Set the default rate type as either a fixed amount or a percentage of earnings.
Enter the default rate value.
Apply the deduction header to the relevant payee deductions.
📌 Note: If you define a default deduction rate on the deduction header, that rate applies to all linked payee deductions and cannot be overridden at payee level.
If you do not define a default rate on the deduction header, you must define the deduction rate on each linked payee deduction.
Best Practices
Create a separate deduction header for each deduction type that needs different reporting, treatment, or arrears tracking.
Name deduction headers clearly so they are easy to identify in reports and during maintenance.
Review the validity period of deduction settings before processing a pay batch.
Use a gross earnings pay code group where a deduction must be calculated on a specific subset of earnings.
Check country-specific settings carefully, as some options apply only to AU Payroll or NZ Payroll.