This guide covers tax, superannuation, leave, banking, payroll classifications and migrating payroll data. Use it alongside the employee’s employment agreement and any applicable award or Common Rule.

SmoothPay supplies country defaults, but you still need to check that each employee’s settings reflect their entitlements and working pattern.

The Internal Revenue Commission (IRC) administers Salary or Wages Tax in Papua New Guinea. The principal legislation is the Income Tax Act 2025, which took effect on 1 January 2026, together with the Tax Administration Act 2017.

As an employer, you need to maintain the required tax registration and employee declarations, deduct tax from taxable payments, submit the required returns, and pay the deductions to the IRC.

Complete the applicable settings below and save the changes.

Keep the supporting employee declaration and any IRC variation instructions with your payroll records.

SmoothPay normally converts the employee’s taxable earnings for the pay period into an annual equivalent, applies the relevant tax thresholds and adjustments, and converts the result back to the pay period.

The standard calculation is progressive. A higher payment may move part of the annualised earnings into a higher tax band; it does not mean all earnings are taxed at that band’s rate.

The result depends on the employee’s tax settings, taxable earnings and the period covered by the payment. Check the pay-period information when paying an unusual period, and use the appropriate classifications for backpay, bonuses and termination payments.

You can view a breakdown of the tax calculated for an employee’s current pay. This shows the earnings used, annualisation, tax threshold and applicable rebates, helping you understand the result.

You can review this from the Payrun screen by:

Review the calculation, then click OK to close the window.

A cash allowance and an employer-provided benefit can have different payment and reporting effects, even when they relate to the same item, such as accommodation.

The allowance code’s Classification identifies the item. Its Earnings type determines whether it is paid to the employee, treated as an employer-provided benefit, and taxable or non-taxable.

For a Taxable benefit provided by employer (auto-deducted after tax), SmoothPay includes the benefit in the tax calculation and then offsets its value after tax. This allows tax to be calculated without paying the benefit’s value to the employee in cash.

Use the IRC’s applicable valuation and exemption rules. Selecting a non-taxable option does not itself make a payment exempt.

Salary packaging uses the same setup as payments and recurring deductions. Use an Agency with the Salary Packaging classification, then add the payment to the employee using the normal recurring-deduction procedure.

A standard deduction comes off net pay. Salary packaging is deducted before tax, reducing the earnings used to calculate tax. The pay summary lists it separately under Sacrifice and pre-tax; the earnings displayed in the summary are not reduced by that deduction.

For example, with K1,025 in earnings and K100 salary packaging, the tax calculation starts from K925. You can check this using Tax calculation from the employee’s right-click menu in the Pay run screen.

The arrangement should reflect the permitted treatment and any IRC approval. Salary packaging is not an additional deduction required for every employer-provided benefit.

The Available classifications section of this guide explains the classifications and earnings types.

For more information about creating and configuring codes, refer to:

Monthly employment withholding returns and payments are due by the 7th of the following month under section 158 of the Income Tax Act 2025. Follow the IRC’s current instructions for annual returns and employee statements.

Open the Reports screen and expand the Tax category to access the PNG reports.

If you need the large-employer statement format, open the Settings screen, select the Options tab, and enable Large employer (S1-L forms)? under Misc options. This changes the S1 output to S1-L, which provides a more detailed allowance and benefit breakdown. It does not change the other reports.

Before submitting returns, reconcile the reports with payroll records and amounts actually remitted. Use the employer’s correct TIN and the IRC’s required tax-type and reporting-period references when making payment. Generating a report in SmoothPay does not submit the return or pay the IRC.

For more information about the large-employer setting, refer to:

The Bank of Papua New Guinea (BPNG) regulates superannuation. The main framework is the Superannuation (General Provisions) Act 2000 and its amendments and regulations. Contributions are paid to an authorised fund, such as NASFUND or Nambawan Super.

The general compulsory framework applies to employers with 15 or more employees, for eligible employees who have completed three months of continuous employment. Smaller employers can participate voluntarily. Check any applicable exemption or special coverage arrangement. The standard minimum rates are set out in BPNG’s contribution notice.

The contribution base is not simply all gross pay. Ordinary earnings and paid leave are generally included; overtime, bonuses and ordinary allowances are generally excluded. Backpay and termination payments have specific classifications, so check their treatment in the table below.

For an unusual payment, establish its treatment before configuring the code. The employee contribution being deducted after tax does not mean it is calculated on net pay.

Open the Settings screen and select the Super tab to review the company defaults.

SmoothPay checks the number of current employees, when determining whether the employer meets the 15-employee threshold for automatic super contributions.

Keep employee records up to date. If only three employees remain employed but 15 are still listed as current because former employees have not been terminated in SmoothPay, the system will treat the employer as meeting the headcount threshold.

A new employee initially has None selected as the Provider in their Super tab. When the employer meets the headcount requirement and the employee has completed three months of employment by the pay-period end date, SmoothPay automatically changes the provider to the company’s default fund in the Settings screen. This activates contributions.

Contributions apply to the whole eligible pay in which the pay-period end date reaches the three-month service threshold. Make sure the employee’s original employment start date is correct.

Employers with fewer than 15 current employees can also start voluntary contributions by manually selecting a provider in the employee’s Super tab. The headcount threshold controls automatic enrolment; it does not prevent this manual setup.

If current staff numbers later fall below 15, SmoothPay continues calculating contributions for employees who already have a provider selected. Changing the employee’s Provider to None stops those contributions. Confirm that stopping is appropriate under the applicable obligations and fund arrangements before making the change.

Selecting a provider manually before the three-month point starts contributions early. Leave the provider as None if the employee is to follow automatic enrolment, rather than selecting a fund merely to complete their new-employee setup.

To check an individual employee, open the Staff screen, select the employee, and select the Super tab.

Review the Provider, Member #, Employee % and Employer %.

Company defaults and existing employee settings should both be checked. Changing a default does not automatically update every existing employee. A missing member number also does not prevent SmoothPay from calculating contributions; complete the fund registration details separately.

For more information about these settings and applying defaults to existing staff, refer to:

The employee’s Super tab also contains the following PNG settings.

For example, if Minimum K is 500 and the percentage calculation produces K420, SmoothPay uses K500. If the calculation produces K600, it uses K600.

The exemption declaration does not obtain approval from BPNG or generate a stored declaration document. Retain the relevant exemption evidence in your own records.

Submit the fund’s required contribution schedule and pay both employee deductions and employer contributions. Section 78 distinguishes employer contributions due within 14 days after month-end from employee contributions due within 14 days of deduction; Nambawan’s guidance reflects that distinction. Confirm the schedule and payment arrangements with your fund.

In the Reports screen, use the Super category to produce the contribution schedule. Review the employee, employer and any housing-repayment amounts before remitting them.

For NASFUND, SmoothPay also produces an SF8 file for upload to the NASFUND portal, this can be found in the Files screen after running the report. Check the employer reference and employee member numbers before uploading it.

SmoothPay does not produce an equivalent Nambawan upload file. Use the contribution report and the submission method required by Nambawan.

Producing the schedule or upload file does not pay the contributions. Reconcile the payment and schedule with the fund’s records.

The Department of Labour and Industrial Relations (DLIR) administers PNG’s employment framework. Leave entitlements are governed by the Employment Act 1978, applicable awards or Common Rules, and employment terms.

Identify which provisions cover the employee before changing leave settings. For example, the Port Moresby and Lae Common Rule provisions discussed below apply to covered employment; they are not alternatives an employer can freely choose between.

Obtain the applicable registered instrument and any later variations. The General Employment (Amending) Award 1975 provides the Lae-related amendments referred to in this guide.

The tables distinguish the entitlement from SmoothPay’s supplied default. An accrual setting records and values leave; it does not by itself establish when leave may be taken or paid out.

Recreation Leave, Sick Leave and Long Service Leave default to Days. Their balances and liability valuations use the to-date balance, including the pro-rated portion since the last anniversary, subject to any cap.

When leave is entered in hours, SmoothPay uses One day equals in the employee’s Contract settings to convert those hours into days. Leave is paid at the employee’s hourly rate.

If employees share the same work pattern and entitlement, set the appropriate default in the Codes screen, with Leave codes selected. Where employees have different work patterns or entitlements, adjust their individual settings under the Leave tab and nested Entitlement tab in the Staff screen.

Changes to leave-code defaults apply to new employees. Use the procedures in the linked guide when changes also need to be applied to existing staff.

The supplied defaults have Accrual starts after blank and then receives full entitlement unselected. Do not enter a qualifying-service period simply because the law delays access to leave: that field delays the start of accrual and can change the resulting balance.

For more information about configuring and understanding balances, refer to:

Section 61 of the Employment Act provides 14 consecutive days, including non-working days, for each year of continuous service. This is not an entitlement to 14 working days.

The Port Moresby and Lae Common Rule provisions examined provide three weeks after 12 months, with proportionate entitlement after three months for covered employees.

For a two-week entitlement, an employee working three days a week should accrue 6 days annually. For a three-week entitlement, an employee working five days a week should accrue 15 days annually.

Recreation Leave uses the to-date balance for its liability. The software’s uncapped default does not replace the employer’s responsibility to manage leave taking and accumulation.

On termination, check the applicable payout rule. Under the Act, employment ending after at least six months attracts a proportionate entitlement of one day for each completed month; the applicable award may provide a different basis.

Section 65 of the Employment Act provides six days per year after six months of service. The Port Moresby and Lae Common Rule provisions examined provide nine days after three months for covered employees.

SmoothPay continues calculating the underlying to-date balance beyond the cap. The excess acts as a buffer when leave is used. For example, an underlying balance of 20 days remains displayed at the 18-day cap after the employee takes 2 days. The liability valuation is also capped at 18 days.

The default cap is therefore not the same as separately preserving 18 days of earlier credits plus current-year entitlement. Review the required configuration where that distinction affects the employee, or where a Common Rule provides a different entitlement.

Apply the relevant notification and medical-evidence requirements when approving Sick Leave. A software balance does not replace those requirements.

For more information about capped and underlying balances, refer to:

The general six months after 15 years entitlement comes from applicable industrial instruments or employment terms. It should not be assumed to apply identically to every PNG employee.

The Port Moresby and Lae provisions examined provide six months on full pay after 15 years with the same employer, with proportionate entitlement after three years.

The five-day example converts six months to approximately 26 working weeks: 26 × 5 ÷ 15 = 8.667 days per year.

SmoothPay calculates the to-date balance and liability from the employee’s start date. It does not pay Long Service Leave on termination until the employee reaches three years of service.

Leave entered in hours is converted using One day equals and paid at the employee’s hourly rate. Keep recognised service dates and previous leave usage accurate, especially when migrating an employee with long service.

Percentage per pay can be used instead of the standard Days method for Recreation Leave or Sick Leave where a proportionate accrual based on actual paid hours better suits the employee’s work pattern.

This is an optional configuration approach, not a legislated PNG accrual formula. Agree the entitlement being provided, calculate an appropriate percentage, and select the pay codes whose hours contribute to accrual. Review any cap in the units used by the chosen method.

For more information about calculating and configuring the percentage, refer to:

The Port Moresby and Lae provisions examined allow up to 14 days of unpaid compassionate leave per year. Paid bereavement entitlement may instead come from an employment agreement or another applicable provision.

The paid Bereavement default should not be used unchanged to record an unpaid compassionate absence. Configure the code’s Leave without pay setting, or use a separate code where paid and unpaid arrangements both need to be recorded.

Use the official PNG public holiday declarations and the employee’s applicable employment provisions to establish which days are payable and any entitlement for working on a holiday.

Where a public holiday falls during Recreation Leave, check whether it should be excluded from the leave used. Section 61 of the Employment Act provides an additional ordinary working day where the holiday falls on a day the employee would ordinarily have worked.

For more information about the calendar reference, refer to:

The Employment Act also provides maternity leave for employees meeting its service requirements. It is not an annually accruing entitlement.

The service tests are at least 108 days worked in the preceding 12 months, or 90 days in the preceding six months. Statutory maternity leave is unpaid unless the employee elects to use available Recreation or Sick Leave credits. Section 100 also provides nursing-break protections. Refer to the Employment Act for the full conditions.

For work-related injury or other specialised absence, establish the applicable entitlement before choosing a leave code. A code’s classification does not itself establish the employee’s legal entitlement.

For more information about recording leave and reviewing final payments, refer to:

Clicking Terminate on the pay run control bar always calculates the employee’s Recreation Leave payout. SmoothPay only calculates a Long Service Leave payout once the employee has completed three years of service.

The automatic Recreation Leave calculation does not establish that a payout is due. Check the applicable Employment Act, Common Rule and employment-agreement provisions, including any more favourable entitlement.

If no Recreation Leave payout is due remove the Recreation leave transaction that the termination process creates.

SmoothPay values to-date leave entitlements through the current pay-period end. If an employee finishes on the 16th but is included in a pay ending on the 20th, the valuation includes accrual through to the 20th.

Processing the termination pay separately is optional, but allows Recreation Leave and any payable Long Service Leave to be valued through to the actual termination date.

For the general termination procedure, refer to:

SmoothPay can generate bank files for PNG payroll. Select the format required by the employer’s banking service and enter the company and employee account details correctly.

Open the Settings screen, select the Bank tab, and edit Direct credit settings.

Use the option matching the bank’s required upload format. BSP CSV is no longer supported; BSP users should select KunduPei (ABA) even though the older CSV option remains in the list.

Complete the bank-supplied company identifiers and account details required for the selected format.

PNG account numbers use a six-digit bank and branch prefix (BSB) followed by the account number.

SmoothPay inserts the separator automatically.

For example:

This applies to both the company account in the Settings screen and employee accounts under the Bank tab in the Staff screen. Retain leading zeros and check the bank and branch prefix against the account details supplied by the bank.

Generate the direct credit report and bank file, check their totals against the payroll, and upload the file through the bank’s service. Check acceptance and authorise the payment in the banking system.

For more information about setup and producing the file, refer to:

Classifications determine how SmoothPay treats and reports a pay item. The tables below explain the PNG choices relevant to payroll setup. They describe SmoothPay’s handling; the underlying payment must also satisfy the applicable tax and employment requirements.

For more information about Work codes, refer to:

For listed allowances and benefits, select the Earnings type that matches the arrangement:

The following additional classifications support system-generated or specialised reporting. They are not instructions to create extra allowance codes for routine setup.

SmoothPay applies the relevant classifications to the leave payouts generated through Terminate. Review those entries and the employee’s service details. Other termination payments, such as ex-gratia amounts or payment in lieu of notice, need the appropriate classification when entered.

The five default paid leave codes described above are taxable, included in gross salary or wages on the Statement of Earnings, and treated as superable. Unpaid absence needs the appropriate unpaid configuration.

For more information about setting up Agencies and employee deductions, refer to:

For PNG, the opening information should preserve the employee’s service, leave balances and current-year payroll totals. The method used to enter or import that information is covered in Migrating payroll data.

When starting partway through a month, the recommended minimum is two summary pay history entries per employee:

For example, if the first SmoothPay pay is in September, separate the January-to-August totals from September payments already made in the previous system.

Do not put the entire year’s history into the starting month. That would include earlier liabilities in that month’s S reporting.

You can enter monthly totals or actual pay-period totals instead. Use monthly or pay-period history when you need SmoothPay to reproduce the earlier months separately; a summarised entry does not recreate their individual detail.

The Edit take-on history window captures summary information:

This method does not recreate individual pay transactions or the detailed classifications of every allowance and benefit. Retain the original payroll records for that detail and check what your chosen migration method can reproduce in historical reports.

Before the first live pay, reconcile the opening history and leave balances with the previous payroll records. Check the current month’s reporting totals, employee deductions and employer contributions, and retain a record of amounts already remitted to the IRC and funds.

For more information about the shared methods and balance checks, refer to: