Cost centres represent the expense accounts (and optional departments, jobs and activities) that payroll costs are allocated to. This guide explains how to set up your cost centres in SmoothPay, assign defaults, and apply or override costing during the pay process. Correct costing ensures payroll expenses flow accurately into your accounting system.
What cost centres are used for
Cost centres determine where wage costs are allocated in your accounting system, including:
Wages and salaries
Leave payments
Allowances
Employer superannuation (if enabled)
Any other payroll-related expenses
They work together with optional Department, Job and Activity codes to give more detailed costing where needed.
Setting up cost centre (account) codes
Cost centres are created and maintained in the Codes screen.
To create or edit cost centres:
Go to Codes
Select the Cost centre (account) category
Select an existing cost centre and click Edit button, or click + button to create a new one
Enter or update:
Ledger code – the matching account code in your accounting system
Description – the expense or liability name
Account type – Expense or Holding
Click Save
Repeat for as many as you need
Colour coding reminder:
Green = Expense account
Red = Holding account (tax, super, net pay, deductions etc.)
Holding accounts can only be assigned to agencies, super funds, or specific deduction codes — never to wage transactions.
Other accounting codes you may need
Depending on your organisation’s costing structure, you may also want to set up:
Departments
Used to group staff or transactions by high-level categories (e.g. “Kitchen”, “Sales”, “Head Office”).
Job codes
Used for job or project tracking.
When Xero is selected, these map to Tracking category 1.
Activity codes
Used for task-level costing.
When Xero is selected, these map to Tracking category 2.
To create these:
Go to Codes
Select the Departments, Job codes or Activity codes category
Select and edit existing entries using the Edit button, or click the + button to create new ones
Enter a Code and Description
Click Save
Repeat for as many as you need.
Setting up default costing (company level)
Company-wide costing defaults are set under:
The Settings screen, by selecting the Accounting tab
Here you can:
Select default cost centres
Choose default Department, Job, or Activity
Assign specific holding accounts to standard payroll liabilities
Enable employer superannuation as a costed expense (Super tab)
Choose your ledger type and posting preferences
Changing the posting method for accounting system integrations
Access additional options via spanner buttons
Spanner buttons
These provide powerful owner-only options, such as:
Fine tune accounting system integrations
Updating default cost centres for all employees
Always back up your database before using spanner options that make changes to costing broadly, as changes are irreversible.
Specific defaults for codes (agencies, leave and allowances)
Some codes have their own costing defaults.
Agencies and Super Funds
Used to assign holding accounts for:
Superannuation funds
Third-party deductions
Go to Codes screen and
Select the Agencies and Super funds category.
Edit an agency or a super fund
Set the Holding account field to the holding account you wish to use.
Save.
Repeat for as many needed.
Leave codes
Leave types can have their own cost centre. This becomes the default for any leave transaction that uses that code.
To apply costing to a leave code:
Go to Codes
Select the Leave codes category
Select the leave code you want to amend
Click the Edit button
Set the Cost centre field
Click Save
Allowance codes
Allowance codes include an optional setting to spread their cost across all expense accounts used in the employee’s pay.
If enabled, the cost of any allowance will be distributed proportionally based on the wage costs already assigned.
To enable this option:
Go to Codes
Select the Allowance codes category
Select the allowance
Click the Edit button
Tick Spread costs automatically
Click Save
Employee level default costing
Each employee can have their own costing defaults. These apply automatically to their pay transactions unless something overrides them.
To assign costing to an employee:
Go to Staff
Select the employee
Select the Contract and Employment tabs
Set the Department, Cost centre, Job, or Activity
Click Save
Notes:
These defaults apply to any new pay transactions for that employee
Leave codes with their own cost centre will override the employee default for that leave only
Imported transactions override all defaults
Leave costing per employee
If needed, you can assign a different cost centre for specific leave types at the employee level.
To do this:
Go to Staff
Select the employee
Select the Leave and Entitlement tabs
Select the leave type
Click the Edit button
Set the Cost centre
Click Save
Employer superannuation costing per employee
Employer super can be costed to a specific expense account at the employee level.
To change this:
Go to Staff
Select the employee
Select the Super tab
Click the Edit button
Set the Cost to field
Click Save
Using cost centres during a pay process
When you create a pay transaction:
It uses the employee’s default costing
Leave uses the leave code’s cost centre
Allowances may be spread automatically if the option is enabled
Imported lines keep their imported costing
Costing can be manually overridden for any transaction
Manually changing costing in a payrun
To override costing for an individual line:
Select the transaction in the payrun
Click the Edit button
Change the Department, Cost centre, Job, or Activity
Click Save
This change only affects that one transaction for that one pay.
Summary
Once your cost centres and defaults are set up:
Most payroll transactions will cost correctly without changes
Accounting exports will post cleanly to the correct accounts
Projects, departments, and jobs receive accurate allocations
Super and tax liabilities will post to the correct holding accounts