When you finalise a pay run in QuickBooks Payroll, journal entries containing the pay run data will be exported to QuickBooks Online.
To view journal entries associated with payroll:
- Select Accounting on the left menu, then select Chart of Accounts.
- In the search box, type in the name of the Default Payment account associated with your payroll. By default, this is the Payroll Clearing account.
- Select Account history under the Actions column.
- You will now be presented with a list of transactions. The transactions marked as Journal under the Type column (2nd column) are payroll journals.
- Select the payroll journal you want to open, then select Edit to view the journal entry.
Note: Payroll journals exported to QuickBooks are dated to the date the pay run is paid.
Some journal entries will display the BAS-W1 and BAS-W2 tax codes in the GST column. These codes are allocated to the following transaction types:
|Transaction Type||Tax Code||Net effect|
|Pre-tax deduction liability||BAS-W1||Debit|
|Pre-tax deduction payment to bank account||BAS-W1||Debit|
For more information on what these tax codes mean, refer to this article from the ATO.
How to exclude earnings from being included in BAS-W1
- Select Employees on the left panel.
- Select Payroll Settings, then select Pay Categories.
- Select the pay category you don’t want to be reported as W1 on your BAS.
- Select the Exclude from W1 in journals tickbox.
- Select Save.
How Salary Sacrifice Arrangements affect BAS-W1
According to the ATO, any amounts relating to a salary sacrifice arrangement with an employee should not be reported as W1 on your BAS.
When a pre-tax deduction or salary sacrifice super amount is recorded in the pay run as a deduction, the BAS-W1 tax code will automatically be assigned to this amount, with the net effect of reducing the BAS-W1 amount to be reported in the BAS.
Note: This applies to all pre-tax deduction categories regardless of the payment method (bank account, super fund or manually paid).
If you have entered pre-tax deductions in your pay run, the corresponding journal entries will show the deductions as a separate entry, in order to apply the BAS-W1 tax code to it.
For example, you have:
- Total earnings in a pay run of $1000
- $100 in pre-tax deductions which are included in the earnings
In the journal entry:
- Wages Expense will be Debited for $1000 and Credited as W1 on the BAS.
- Payroll Clearing will be Credited for $100 and Debited from W1 on the BAS.
The net effect is $900 reportable as W1 on the BAS, ultimately excluding the pre-tax deduction amount from W1.
Note: there is no change in the tax code of W1 for post-tax deductions as this is included in the gross wage amount and is therefore not exempt from being reported as W1 on the BAS.
Content sourced from KeyPay