Friday, 24 Mar 2023
Every business with employees needs to have a payroll system to pay salaries and wages to the workers. Entrepreneurs must clearly understand the process to comply with the tax regulations and pay fair monthly remuneration and other benefits and compensations. The correctly calculated amount must be credited into the accounts of the employees on a specific date regularly.
However, businesses that have a large number of workers may find it challenging to understand the complexities of superannuation, payroll and salary sacrifice. Thus, here is a payroll guide that offers the basics that every Melbourne employer must know to manage finances effectively. They must also take professional help to keep the process streamlined and employees satisfied. Here is a list of the basic information needed to maintain accuracy and legal obligations.
The first step of setting up the payroll system for a business is to collect employee information, including their working hours, leave entitlements, Tax File Number (TFN), superannuation fund details, etc. Entrepreneurs must use professional bookkeeping Melbourne to calculate the salaries and taxes for all employees based on this information.
They ensure that the salaries are paid in compliance with the laws and that taxes are withheld and filed correctly. Payroll reporting is a part of the system, which the government has recently upgraded to ease the burden of employers. The Australian Taxation Office has implemented the Single Touch Payroll, which provides payroll information to the ATO for every pay period.
Bookkeepers use STP-enabled payroll software to send out the reports with the help of the business owner who is authorised to send them.
Employers in Melbourne pay payroll taxes whose wage bill exceeds the monthly threshold of $58,333. The tax obligations change for every state and are calculated on the employees’ pay. The tax rate in Victoria stands at 4.85%, barring regional employers in the state.
Businesses operating in Victoria also have to pay a mental health and wellbeing surcharge if they pay taxable wages in the state and their Australian wages are higher than the first annual threshold of $10 million, with a threshold of $833,333 for the first month. The tax-free yearly threshold for the period of July 2022 to June 2023 stands at $700,000, with a threshold of $58,333 per month.
Pay As You Go (PAYG) withholding is the process of withholding employee’s income tax and paying it directly to the ATO on their behalf. Melbourne-based businesses must comply with this tax regulation if they pay salaries and wages to employees and contractors.
Sole traders and partnerships are exempted from withholding income if they take money from the entity. Expert Melbourne bookkeepers reconcile the PAYG they are withholding with the PAYG that will be paid to the ATO to maintain the accuracy of records.
Many business owners offer employees fringe benefits to retain or hire them in the first place. These include providing transport service or reimbursing the school fee of kids, etc. However, the employer has to pay tax on the benefits offered to the employees in addition to the salaries and wages.
Bookkeepers in Melbourne help to calculate the fringe benefits tax and lodge the return to the ATO on the due date. These are a part of the Australian business taxes. The employees’ payment summary or the STP income statement should include the reportable fringe benefits.
Business owners should know the Fair Work Act 2009, which regulates the rights and responsibilities of employees and employers. It ensures that the workers are paid per the national minimum pay rate for their contribution to the organisation. Also, businesses must keep all the records of the payments and provide the employees with payslips that include the breakup.
The Fair Work Commission reviews the national minimum wage amount and pay rates every year and can make changes that get implemented before the upcoming financial year. Thus, bookkeepers are always on the lookout for updates and announcements made by the Commission. The Fair Work Act also helps to decide the employees’ leave entitlements.
Superannuation is the amount the employer sets aside for employees to fund their retirement. The employer makes regular contributions to the super account of the employee, which is known as super guarantee, and it is in excess of the salaries and wages. Bookkeepers help to calculate the correct super guarantee for every employee.
The current super guarantee rate stands at 10.5% of the ordinary time earnings of the employee and will be increased to 12% from July 2025. If the employer fails to pay the super guarantee by the due date, they have to pay the super guarantee charge. Employees can increase their super by making contributions to it in addition to the amount paid by the employer. It is known as salary sacrifice to super.
Payroll management is the most significant aspect of bookkeeping and running a business successfully. Thus, entrepreneurs must be aware of the basics of the system to pay their employees and taxes on time.
