Users can download a report which details, step-by-step, the process of how any individual employee's tax is calculated.
How to download the report:
Such report can be generated from the Payroll section. Once here, users need to click on Reports & FS5s and then click on FSS Calculation Report:
From there, users can select whether to download such a report for an individual employee or for the all the employees in the period. Users can also select multiple payroll periods.
The same report can also be downloaded from the specific payroll period, by clicking on Reports -> FSS Calculation Report.
Once generated, the report will include a breakdown of an employee's income in previous periods and of the current period.
Tax is then calculated by grabbing the taxable portion of income earned to-date, dividing by the number of payroll periods to-date, and multiplying by the total payroll periods in a year (ex: 12 if the payroll is monthly, 26 if it is fortnightly, and 13 if each payroll period covers 4 weeks).
This calculation results in the estimated annual taxable income. After this, the system will grab the tax rate of that individual and calculate the annual tax due.
To then calculate the tax of that period, the system works out the following formula:
(Projected tax due / Periods in a year) * Payrolls this year (including this) - Tax paid to date.