Remember the days of payment summaries, tax tables and cheques? Yeah, payroll and wages have changed SO much in the last twenty years. If you’ve been DIY-ing your own payroll and wages or you’ve outsourced them and just don’t understand the ins and outs, keep reading because I’m going to clear a few things up.
Payment summaries for your employees to do their tax returns are a thing of the past! These days, you lodge each payroll to the ATO via your payroll software. You still do the tax payment on your BAS, this is just reporting the figures to the powers that be more than once a year. Employees also get their payslips each time you pay them. But instead of the annual payment summary, they simply login via MyGov and they’ll see their income right there. At the end of the year, once they show as ‘Tax Ready’ your employee can go get that tax refund – or pay.
This system is what is called single touch payroll or STP. And from a bookkeeping perspective? It’s magic.
As an employer, you can’t just pay your employee from your business bank account and sort out the ‘other’ stuff later. All payroll is legally required to be processed through payroll software that is integrated with the ATO. If you’re not using software, you’ll need to set this up stat! Xero offers an excellent payroll system from as little as $10 per month.
Further to this, if you want to claim employee wages as a business expense, it needs to be processed through payroll software. All of this work needs to be done and lodged to the ATO before the employee receives payment from you.
NOTE: It can’t be done the other way around!
Superannuation is now 10% per employee and it’s set to increase every year. This is on top of their wage. Super payments must be paid regardless if the employee is casual or part time.
It gets a bit tricky here because super needs to be paid through a clearing house. As a bookkeeper, I’m all over this but if you haven’t done it before and have questions, I’d be happy to help!
Hiring your first employee is an exciting time but it needs to be done right. You can’t just bring them on and hope for the best, you have legal responsibilities. For example, you are required to:
- Provide a fair work statement
- Provide a safe and suitable work environment
- Provide super choice forms
- Provide a tax declaration form
- Have workcover insurance
Ideally you would also have these 👇 in place so they know all the ins and outs!
- an employee handbook to give them
- Issue them with your leave policy
If you’re unsure about any of this, check in with your BAS agent for advice in the lead up. We’re trained and ready to help you get this right.
The important thing to note here is that once you become a legal employer, you are responsible for so many things, like financial obligations that go along with employing staff. Any mishaps like incorrect super payments can result in a hefty penalty so please, do the background work and set your staff up the right way!