When you manage your own business and take on staff, you have an important responsibility as an employer to treat your staff well. To ensure employers take this responsibility seriously, there are a number of bodies who have set up legal obligations that employers need to comply with, and arguably the most important involve payroll activities.
Two key obligations that carry significant penalties if not administered correctly are Pay As You Go Withholding (PAYGW) and Superannuation Guarantee.
PAYG Withholding obligations generally apply to payments made to:
- Your employees
- Other businesses/contractors who don’t quote their ABN
Prior to making these payments, your business is required to be registered for PAYGW with the Australian Taxation Office (ATO).
PAYGW – Employees
It is mandatory to have each employee complete a Tax File Number Declaration form upon commencement of employment. This will determine your withholding obligation for each employee.
You need to ensure that each employee is set up correctly in your payroll software, so that the correct amount of PAYGW is withheld from their gross wage. For example, higher withholding rates will apply if they have a HELP debt.
PAYGW withheld from employees must be reported and paid to the ATO in your monthly or quarterly activity statements.
PAYGW – Other Payments
Further, should you make a payment of $75 or more to another business or contractor where they have not quoted their ABN, you are required to withhold 47% tax from the payment. This must also be reported and paid to the ATO in your activity statements.
Failure to comply with your PAYGW obligations can lead to penalties being imposed by the ATO, including general interest charges, administrative penalties and Director Penalty Notices, whereby the Director becomes personally liable for the outstanding obligation.
Superannuation Guarantee refers to the compulsory superannuation contributions that employers are obligated to pay on behalf of their employees.
The current superannuation guarantee rate is 9.5% of your employees’ ordinary times earnings (OTE). OTE includes salary and wages, most allowances, bonuses and leave payments, but not overtime payments.
Employers are required to make superannuation contributions to their employees’ superannuation funds at least quarterly, as follows:
|Quarter||Period||Payment due date|
|1||1 July – 30 September||28 October|
|2||1 October – 31 December||28 January|
|3||1 January – 31 March||28 April|
|4||1 April – 30 June||28 July|
If you do not pay these contributions in full, on time and to the correct fund, you may have to lodge a Superannuation Guarantee Charge Statement. You will then have to pay the superannuation guarantee charge including administrative penalties.
Superannuation Guarantee is capped at the maximum super contribution base. The current maximum super contribution base is $54,030 per employee per quarter. If you have an employee that earns more than this, your obligation is capped at 9.5% of $54,030.
Failure to comply with your Superannuation Guarantee obligations can also lead to penalties being imposed by the ATO, including general interest charges, administrative penalties and Director Penalty Notices.
Do you have questions involving payroll activities or other employer obligations? Our team at BLG Business Advisers will make sure you get the details right. Get in touch with us online or by calling (02) 4229 2211.