SimplePay has a built-in item to accommodate the special tax and reporting requirements related to employer loans. There are two steps you need to follow:
Setting Up Loan Instalment
To add an employer loan:
- Go to Employees and select the relevant employee.
- Click on Add next to Regular Inputs and then Employer Loan.
- Enter the relevant information.
- Click Save.
If you are going to charge the employee interest, enter the rate next to Interest rate. Please be aware that interest-free or subsidised interest loans might have tax implications, as discussed below.
Regular repayment is the total amount that will be deducted from the employee’s pay each period. If you are charging the employee interest, the interest is never deducted directly from the payslip, but is rather added to the outstanding balance.
Editing Loan Balance
Adding a loan to an employee tells SimplePay that the employee has a loan, but the loan will not yet have a balance, so no repayments will take place. To set a balance, click on Employer Loan under Payslip Inputs and enter the amount next to Balance Increase.
By default, an increase in loan balance is paid out on the current payslip and repayments only start on the next payslip.
If you don’t want to pay out the amount on the payslip, check Don’t pay out balance increase. You will then also have the option to check Balance increase is at beginning of period, which means repayment will start on the current payslip instead of the next.
Please note: if the balance you’re entering is the closing balance from the previous period, both checkboxes mentioned above should be checked.
Setting a Once-off Repayment will override any regular repayment defined for this loan.