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How to Reverse Pre-Tax Deduction and Make Post-Tax Deduction

Dominic Beckham
EH Content Team

If you find that you have used a Pre-Tax Deduction category for a Post-Tax Deduction (i.e. a deduction not classified as a Salary Sacrifice amount), you may need to complete an adjustment to reallocate these amounts to a post-tax deduction.

Important

This process requires careful attention to ensure correct tax calculations and compliance. Always review superannuation and PAYG calculations after making adjustments.

Correct pre-tax to post-tax deduction errors
  1. Run a Deductions Report for the affected Deduction Category during the Financial Year to identify the amounts that need reallocation. Information on how to do that can be found here.
  2. Create an ad hoc/off-cycle pay run and include any employees requiring adjustment. Information on how to do that can be found here.
  3. Use Actions Make a Deduction. This will create a deduction line in the pay run.
  4. From here, you will select Pre-Tax Deduction (or your relevant Pre-Tax Deduction).
  5. Select Manual Payment and add in a Note - This is very important to do as the system will need to note to recognise the pay run lines.
  6. Enter this as a negative value to 'reverse' out the incorrect deduction category.
  7. After this, again use Actions Make a Deduction and create a line for the Post-Tax Deduction amount.
  8. Enter the same amount as a positive value to add this to the correct deduction category.
  9. Check the Superannuation and PAYG Calculations in the pay run and make any necessary adjustments required:
  10. Review and finalise your adjustment pay run.
  11. You can then create an Update Event and confirm that your variance has been cleared and submit.

Warning

Always ensure you add detailed notes when making manual deductions. This helps with audit trails and system recognition of the adjustments.

Why this process is necessary

When deductions are incorrectly categorised as pre-tax instead of post-tax, it affects:

  • PAYG tax calculations
  • Superannuation calculations
  • Year-end reporting accuracy
  • Employee tax obligations

This adjustment process ensures that the correct tax treatment is applied and maintains compliance with tax regulations.

 

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