Paying Dividends to Excluded Employees (Directors)

How to record an excluded creditor claim

To record an excluded employee claim you need to tick the "Is Excluded Employee" tick box on the Employee Creditor Entry form.

If the employee is marked as "Director of a Company", consequently the "Is Excluded Employee" tick box is selected as ticked by default.

Tip: For further information on Director thresholds, please refer to the ASIC article here.

Excluded employees - prorated calculation

Excluded employees may include $2000 of superannuation and wages as a priority claim. The amount paid as priority will be pro-rated between the total of admitted amounts:

For example, in the above entry the superannuation claim is $5,600, The amount admitted will be 5600/13600 x $2000, representing the prorates total of the super claim as a percentage of the total wages and super claims.

Creating an excluded unsecured claim

When you admit a priority claim, the rejected amounts will represent the unsecured claim the claim will look as per the screenshot below:

Rejecting the employee claim

If you reject the entire claim, all amounts will be considered unsecured.

Auto-admit and thresholds

The above claim was auto-admitted, taking into account the statutory amounts for excluded employees.

When you pay an unsecured dividend, enter the admitted amount in the unsecured admitted amount pictured below:

Unsecured reject priority dividend

The unsecured dividend paid will be based on this admitted amount.

When you pay an unsecured dividend to an excluded creditor using this method, the dividend will still be paid as if the payment is made to an employee creditor and tax will be taken out in accordance with the remaining balances.

The dividend will be paid to each component of the the rejected priority claim amounts and pro-rated on the total amount rejected to participate in the dividend.

The tax treatment will be applied to each component as is appropriate for each component of the claim.

Unsecured claims

The Non-Priority Unsecured value relates to unsecured claims made by the director. E.g. a claim for monies lent to the company, travel claims or phone expenses. This unsecured amount is non taxable.

Reporting employee payments and Single touch payroll

As the nature of the rejected employee claims are payroll claims, any payments are reported for single touch payroll purposes. Superannuation claims will be handled as a superannuation claim to be remitted like any other superannuation claim.