- March 31, 2022
- Comments: 0
- Posted by: user
I think we can all agree that the best thing about running a business is the endless paper work you have to put up with. (There may be one or even two, people out there that would disagree with that statement).
But like it or not, running a business means a lot of administration. One of the first milestones a business reaches is taking on that very first employee. And that means you suddenly have a lot more paperwork and administration to do. A lot more to think about and a lot more workload (and time) you will need to devote to running your business.
The good news is that once the initial set up is done it is not nearly as bad as it used to be. The internet and software have dramatically reduced the administration you need to do to employ people.
The key is setting everything up correctly right at the beginning.
You should really consider getting your accountant to help you with this as it can be pretty complicated and it’s easy to miss something important.
(Shameless self promotion here) feel free to give us a ring to discuss how we can help you to set up modern and efficient ways to employee people with a minimum of fuss and time wasted.
You can also get your accountant to simply do the work and administer your payroll for you.
Call us on 1300 268 800
So what do I need to do?
Register for Pay As You Go Withholding (PAYG Withholding)
Every time you pay an employee – you need to withhold a percentage of that pay and give it to the Australian Tax Office. This is then used to pay off the employee’s income tax at the end of the financial year. You can register online via the Business Portal. Or if you are a sole trader – via the ATO portal in MyGov. Or get your accountant to do it for you.
Make sure you register BEFORE you hire anyone, as you are required to withhold from the very first pay day (even if you don’t have to actually withhold anything). You can read more about PAYG withholding by clicking HERE.
Remember that an employee can be a director and some contractors too. The amounts you withhold depend on the individual circumstances of the employee and you need to make sure you are withholding the correct amount.
Single Touch Payroll (STP)
STP is a requirement now for virtually any business. Basically you need to buy some SBR (Standard Business Reporting) software and whenever you do your payroll runs – the software will report that payroll to the ATO. This is a great idea because, since you’re using accounting software for PAYGW anyway, you can use it for all your other reporting too. So accounting software like XERO, MYOB, Quickbooks and the like, let you do your Business Activity Statements (BAS) at the same time.
So you can report your GST, Fringe Benefits Tax or anything else you will find in a BAS, all in the one go with the one software solution. You can get your tax agent to do this for you, or have them set up the software and admin so you can do it yourself.
We recommend XERO (as will most businesses – ask around and see who most people use) and we can set everything up for you.
But any approved SBR software will do. There are even some free software solutions that you can use (but they can be very…… odd (that is to say – hair pulling), to use and you really do get what you pay for).
To read more about STP, click HERE.
For the vast majority of workers (and some contractors) superannuation is mandatory. As of 1 July 2022, all employees will receive super regardless of their earnings. When you report to the ATO via STP you will also be reporting contributions for the Super Guarantee. Super is not a tax – it’s what your employees will use to support themselves when they retire. The ATO is VERY vigilant about super (as they should be).
To read more about how to report, make contributions and keep records – click HERE.
There are a number of ways to report superannuation but the easiest is to make sure your payroll software is SuperStream compliant. This means you are just doing it the same time you do your pay runs via your online accounting software (XERO, for example, is compliant).
You can also do it through a commercial clearing house or the Small Business Superannuation Clearing House. You can also do it via your super fund, (if it offers this service).
I would recommend reading the checklist on the ATO website. To consult the “Super obligations for employers checklist”, click HERE.
You must withhold tax for contractors that have a voluntary agreement with you to withhold tax from their payments or don’t quote their ABN to you. You might also need to pay superannuation as well.
If you are doubtful about whether someone is an employee or a contractor – there is help on the ATO website. Click HERE.