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This article explains how to set up xero accounting software so that owners wages and super are calculated properly

Step-by-step guide

For the owners wages:

  1. Log into your xero account
  2. go to settings >> payroll settings
  3. go to the 'pay items' tab
  4. set up a new pay item called 'ordinary hours owners' . Set this in the same way as the ordinary hours rate on the same screen.
  5. map this pay item to the correct account 'wages and salaries associated persons' in the same section
  6. save this item
  7. then go to xero main menu >> payroll >> employees
  8. You must do this step now not later: select the employee >> employment tab >> ordinary earnings rate >> set this to  'ordinary hours owners' 
  9. select the employee/business owner >> pay template >> and set their primary earnings rate to 'ordinary hours owners'

This will now post the owners wage to this account each time you do a payrun. This is the account smartvetapp uses to work out owners wages and their adjustments. 

Please note that account names and pay items are customisable, so the above is an example of how most accountants name the accounts and pay items, but they may be named slightly differently.

 

For the owners superannuation:

  1. Stay in the pay template for the employee: manu >> payroll >> employees >> pay template
  2. Click on the name of the super fund
  3. change the expense account to 'superannuation associated persons'
  4. Save the changes

 

For Smart Vet App owner wage calculation:

  1. go to the settings >> setupwizard >> making things fair >> edit monthly settings
  2. for owners_wage >> set all months PRIOR to the current date to zero, all months after the current date to the fair owners wage
  3. what is a fair owners wage? this is subjective, but for a Veterinarian working a 38 hour week, a fair wage is about $100,000 per year, so 100,000/12 for a month = 8,333 per month
  4. do the same for superannuation adjustment using a value of 9-10% of the owners wage adjustment eg. 833 per month

Please note that the wage adjustment is an example only, in situations where there are additional family members working in the business, then it would be more than $100,000

 

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