Union fees and voluntary deductions¶

Some deductions are not tax and are not required by any law. They are amounts the employee asks you to take out of their pay, such as union or membership fees or a regular donation to a charity. These are called voluntary deductions, because the employee has chosen to have them taken out.

You make these payments from the employee's pay on their behalf — the money is theirs, and you are simply passing it on to the union, association or charity they nominated.

In one line

A voluntary deduction is an amount the employee asks you to take out of their pay — such as union fees or a donation — with their written authorisation.

Why this matters¶

An employee might ask you to take their union fees or a charity donation straight out of each pay so they do not have to pay it separately. This is a normal request. But because it is the employee's money, you can only do it when the employee has authorised it in writing. Knowing this keeps you on the right side of the Fair Work rules.

What you will learn¶

What a voluntary deduction is
Why the employee's written authorisation is needed
How workplace giving can affect how tax is worked out

Understanding the concept¶

A voluntary deduction is an amount the employee has chosen to have taken out of their pay. Common examples are:

Union or membership fees — the employee's fees for a union or professional association, taken out each pay and paid on to that body.
Workplace giving — a regular donation to a charity, taken out each pay and paid on to the charity.

Fair Work explains that an employee can give you a written authorisation that lets you deduct money from their pay. The authorisation must be genuine — the employee cannot be forced into it — and the employee can withdraw it in writing at any time. If the amount can change over time, extra rules apply, so it is worth keeping the authorisation clear and up to date.

Because it is the employee's own money going to a body the employee chose, this kind of deduction is treated as being for the employee's benefit.

For accountants & bookkeepers

The ATO explains that in a workplace giving program, the employee makes a donation to an eligible deductible-gift-recipient charity and you pass it on. You can choose whether or not to reduce the PAYG withholding to account for the donation. If you do reduce it, you work out withholding on the employee's gross earnings after subtracting the donation. If your payroll cannot do that, you can still run the program without reducing withholding, and the employee claims the deduction in their own tax return. Either way, the donation amounts are reported through STP.

Example¶

Priya asks her employer, in writing, to take her union fees out of each fortnightly pay and pay them to her union. She also joins the workplace giving program and asks for a set donation to a registered charity each pay. Her employer keeps her written authorisation on file. Each pay, both amounts are taken from Priya's pay and passed on to the union and the charity. Her payslip lists each amount by name, so Priya can see exactly what was taken out and where it went.

Common mistakes¶

Taking out union fees or a donation without the employee's written authorisation.
Treating a voluntary deduction as the employer's money — it belongs to the employee.
Changing the deducted amount without checking whether a fresh authorisation is needed.
Assuming a workplace giving donation always reduces tax — that is a choice the employer makes, and if it does not, the employee claims the deduction at tax time instead.

How this works in myaccountant¶

In the app — you can add a voluntary deduction, such as union fees or a workplace giving donation, as a deduction pay item on an employee's pay. Once it is authorised and added, it comes out each pay run and appears by name on the payslip you can email to the employee, so the gross pay, the deduction and the net pay all line up.

Key points¶

A voluntary deduction is an amount the employee asks you to take out of their pay.
Common examples are union or membership fees and workplace giving donations.
The money belongs to the employee — you pass it on to the body they chose.
You need the employee's genuine written authorisation, which they can withdraw.
Workplace giving can change how tax is worked out, or the employee claims it at tax time.

Learn next¶

General information only — not tax, super or financial advice.

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