For more information on how Garnishee Orders work in Australia and variation for each State, please refer to our Garnishee Order Factsheet.

Set Up a Garnish Deduction

To correctly set up a Garnish Deduction in Xero, you need to complete three steps:

1. Create a Garnish Liability Account
2. Set up the Garnish Deduction Pay Item
3. Add the Garnish Pay Item to the Employee's Pay Template

Create the Garnish Liability Account

1. Go to Accounting > Chart of accounts
2. Scroll down to the Liability Accounts and check if you already have a Liability Account for Garnish Deductions, if not, you will need to create a new one.
3. To create a new Liability Account click on [Add Account]
   
   è  The Add New Account screen
   
   
   
   
4. Select/Enter the following details:
   • Account Type > Current Liability
   • Code > Enter a 3-digit code starting with 8
   • Name > Type: Payroll - Deductions Garnish
   • Tax > Select: BAS Excluded
5. Click on [Save]
   

Set up the Garnish Payroll Deduction

1. Once you have created the Deduction Liability Account, you can set up the Garnish Deduction Pay Item
2. From the Organisation Menu go to Settings > Payroll Settings
3. Click on the [Pay Items] > [Deductions] Tab
4. Click on [Add] > None
5. Select/Enter the following details:
   • Deduction Name > type: Garnish
   • Account > Select the Garnish Liability Account
   • Reduces PAYG Withholding > Leave blank
   • Reduces Superannuation > Leave blank
   • Excluded from W1 > Leave blank
6. Click on [Add]
   
   è  The Pay Item screen

Add the Garnish Deduction Pay Item to the Employee's Pay Template

1. Go to Payroll > Employees
2. Open the Employee details and click on the [Pay Template] Tab
3. Click on [+Add Deduction Line]
   
   è  The Add a Deduction Line screen opens
   
   
   
   
4. Select/Enter the following details:
   • Deduction Type > Select: Garnish
   • Calculation Type > Select either Fixed Amount or Post-Tax %
5. Click on [OK]
   
   è The Deduction Line is added to the Employee's Pay Template
   
   
6. Enter the applicable Garnish amount or % as detailed in the Garnishee Notice
7. Click on [Save]