This guide walks you through the steps to calculate marginal tax for both normal pay run and final pay in Workstem, with clear instructions and examples to help you manage employee payroll efficiently.

To calculate marginal tax, you can use the ATO calculator to accurately determine the tax amounts for Tax withheld (Tax 1, 2, 3). Follow the steps below for guidance.

Step 1: Calculate the Employee’s Average Weekly Salary (YTD Average Earnings)

Step 2: Calculate Tax 1

Step 3: Calculate the Total Amount Subject to Marginal Tax

Step 4: Calculate Tax 2

Note: The Tax File Number declaration in the ATO calculator should always be set according to the employee's specific circumstances.

Step 5: Calculate Tax 3

Step 6: Compare and Finalize Tax Amount

In Workstem, there's no need to manually calculate marginal tax step by step—the system handles it for you! In this section, we'll walk you through how Workstem calculates marginal tax during payroll processing.

For example: Employee John Doe works 38 hours per week and earns an average weekly salary of AU$1918. Receives a bonus of AU$5000 in the fourth week of payroll, Workstem system calculates his marginal tax.

To view the calculation for marginal tax, you will need to create a payroll first. Under [Payroll] > [Pay Run] > select [One-time Pay Run] or [+ New] to create a payroll calculation.

After payroll calculation is done, click on [View] to view for employee pay run details.

In the employee’s pay run details, under the [Taxation] section, you can see the [Taxable Salary] and [Normal Tax] amount for the employee.

Note: The Workstem system calculates Normal Tax by applying the ATO tax rates to the Taxable Salary. You can always cross-check the accuracy of the calculated Normal Tax by entering the Taxable Salary amount into the ATO calculator.

Note: The Tax File Number declaration in the ATO calculator should always be set according to the employee's specific circumstances.

You can also get the total amount subject to marginal tax under the [Marginal Salary].

In the employee’s pay run details, scroll down and expand [Others] column, you will see the amount of the [Ytd Avg Earnings] and [Ytd Avg Tax] (Tax 1) calculated by the system.

By having all the data in the system, we can now calculate for the marginal tax for employee John Doe:

1. Ytd Avg Earnings = 1918

2. Ytd Avg Tax (Tax 1) = 548

3. Marginal Salary = 5000

5000/52 + 1918 = 2014

4. Tax 2 = 579

5. Tax 3： (579 – 548) * 52 = 1612

5000 * 0.47 = 2350

1612 < 2350

6. Marginal Tax = 1612

When an employee leaves service—whether through resignation, retirement, or termination—correctly calculating their marginal tax on both the final salary and annual leave payout is crucial. Workstem system makes this process straightforward, but it’s important to understand how marginal tax applies to these components to ensure accurate payroll processing and tax compliance.

First go to [Payroll] > [Pay Run] select [+ New] to create a normal pay run.

You can also locate the terminating employee by clicking [View] next to the employee’s name.

Under [Termination] page, fill in the following details:

Scroll down to the [Tax Component] section, you will see the annual leave payment marginal tax calculated by Workstem.