There’s lots to do when businesses engage a new worker. As an employer, you’ll be busy going through the onboarding process and showing your new employee the ropes, but there are other important things to do when you add a new member to your team.
Keeping accurate records complete with the right information is essential for businesses to maintain, and that means updating and adding data when engaging a new worker. Here are some things to keep in mind as you go through this process:
For small businesses, getting the administrative aspects of payroll and super in order can be stressful and confusing. Things need to be paid by certain dates at certain amounts, and failure to comply can have some serious consequences, PARTICULARY when it comes to employees pay and entitlements.
So what does it mean for a small business or employer if they don’t pay super on time? Here’s what you need to know about the super guarantee charge, and how you can avoid it.
Knowledge of payroll is an important skill for bookkeepers, accountants, business owners, and BAS agents. EzyLearn has payroll courses in multiple accounting software, but now we’re introducing a course that covers all of these payroll training courses in one place, and under one fee.
Repayments on a business loan may be less than super and PAYG combined
It’s not uncommon for small businesses to take out a business loan to meet their super and PAYG obligations – but this should never be a knee-jerk reaction to lean times.
Depending on how many employees work for you, the repayments on a business loan are typically smaller than all of your payroll obligations — this includes superannuation and PAYG — combined. If you get a loan to fund 12 months of your business, payable over a 24 or 26 month period, the repayments will be far easier to manage each month.
Interest is usually a tax deduction
Businesses are able to claim the interest from any business loan as a tax deduction, so even if the annual percentage rate (APR) adds a few additional thousands of dollars to your capital amount over the period it takes to pay the loan back, the interest will still go towards reducing your taxable income.
This is a more favourable option to delaying payment to your employees (illegal) and delaying payment of PAYG and superannuation withholdings, which could incur a Failure To Lodge (FTL) penalty, plus a general interest charge (GIC). Note: Fines and penalties cannot be claimed as a tax deduction and are therefore dead money.
Do your sums first
Don’t forget that, while a business loan to cover payroll for 12 months will be easy to repay initially, your business’s profits will need to improve substantially over the next year so that you can continue to meet your loan repayments AND your payroll obligations for that year.
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You can easily work this out using Microsoft Excel. Our Intermediate Microsoft Excel training courses show you how to determine if you can afford to take out a mortgage, but because all of our fields remain “unlocked”, you can easily modify them to suit a business loan scenario. Visit our website for more information on all of our Excel training courses.
Our online training courses feature real-life case studies to make our learning more relevant and true to life.
Using Excel to work out your PAYG and super obligations is a great way for small businesses, with a small number of employees, to save money. It saves you having to purchase this extra module in MYOB or Xero, for instance, when you may rarely use it. Saving money for small business is crucial as often it’s these same small businesses that have trouble making payroll payments each week, fortnight or month — and then wind up incurring further fees from the ATO when they’re late with their reporting and payments. It’s a vicious cycle.
Get financing. There are lots of ways to do this, but a common method, particularly if you need access to funds quickly, is to get a short-term business loan. Many short-term business loans don’t require businesses to have a great credit score, and will offer funding of as little as $5,000 right up to $500,000.
You’d have between 3 and 36 months to pay back the loan, but you need to be aware — the annual percentage rates (APR) are usually high. Most lenders require the business to have been active for a minimum of 9 months, and have revenue of more than $75,000 per annum. However, if paid off quickly, these can be an alternative to incurring penalties — it will obviously depend on your business’ individual circumstances.
Keep on top of bookkeeping
If you stay on top of your bookkeeping, you’ll either reduce the likelihood that you won’t make payroll, or as a worst case scenario, be able to foresee the periods when you won’t be able to, and be able to arrange finance in time to cover it.
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Use the Ad Hoc Payroll Guide included in our Intermediate Microsoft Excel training courses to determine the rate of PAYG tax to withhold — and the required super contribution amounts in Excel. Visit our website for more information on our entire suite of Excel training courses.
Don’t get lumped with penalties when you don’t need to!
It’s not only frustrating and disheartening, but a waste of business funds to be penalised for lodging your financials too late.
A LOT OF SMALL BUSINESSES have trouble managing their payroll, especially when they only have a few employees and paying to access a payroll system in their accounting package is an unnecessary expense. You’ll learn how to use Excel to manage your PAYG and super contributions in our Intermediate Microsoft Excel Training Courses. However, sometimes you may have a backlog of PAYG and super payments. Let’s take a look at how to manage these.
For businesses that only withhold up to $25,000 each year, you’re supposed to make PAYG payments and file a withholding report each quarter. You have 28 days from the end of the quarter to do so, after which time, you may incur a Failure To Lodge (FTL) penalty.
Superannuation payments
As with PAYG payments and reporting, you can also incur a FTL penalty for not lodging or paying your employees’ superannuation contributions in time. All businesses, regardless of size, have to make superannuation payments each quarter — the ATO sets out the due dates for each period on their website.
Lodging late PAYG and super payments
The ATO only applies penalties for failure to lodge reports or make payments for each period of 28 days (or part thereof) that a document or payment is overdue. Each period incurs one penalty unit for each document, up to a maximum of five penalty units.
From 2015 onwards, the value of a penalty unit is $180 (previously it was $170) for small businesses, which are defined as entities with an assessable income or GST turnover of no more than $1 million a year.
The maximum penalty a small business will pay is $900 for each document or payment that is overdue. Note too that FTL penalties will also incur a general interest charge (GIC), applied on top of the penalty.
Managing late PAYG and super payments
Use the Ad Hoc Payroll Guide, a new case study that is included in our Intermediate Microsoft Excel Training Coursesto determine the rate of PAYG tax to withhold and the required super contribution amounts in Excel. Once you’ve worked out the required amounts (visit the ATO website for tax tables prior to 2017), lodge the necessary PAYG payments and reports to the ATO; pay super contributions using the SuperStream super clearing house.
The ATO will write to you if you are required to pay a penalty — sometimes they are waived for first-time offences, or if the amounts are small.
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This creative program can also be used to conjure up the most beautiful and modern pictorial slides to enhance any presentation or induction. Find out more about our 2016 version PowerPoint courses.
Third Quarter is Looming; Are You Up to Date with Payroll?
Most businesses using an accounting program like MYOB or Xero will use the included payroll package to manage their employees’ payroll. For businesses with only a few employees, however, the additional payroll function is an unnecessary expense.
Every Australian business with employees who are each paid more than the tax-free threshold has a legal obligation to withhold tax on their employees’ behalf. This is known as the PAYG System (or Pay As You Go), where amounts of tax are withheld from each employee’s wage payments.
Businesses that withhold up to $25,000 each year only need to make payments to the ATO each quarter; businesses withholding amounts greater than $25,001 may have to make payments to the ATO each month or as regularly as each week.
At the time of writing, the tax-free threshold is currently $18,200, which is equivalent to:
$350 a week
$700 a fortnight
$1,517 a month
Superannuation contributions
Again, any business that pays its employees more than $450 each month must also make regular superannuation contributions on their employees’ behalf. We’ve written in the past about the government’s clearing house called SuperStream, which allows you to easily make super contributions — for free.
But first, you need to work out how much super you need to contribute for your employees. The superannuation guarantee is currently 9.5 percent of your employees’ gross wages, which is payable on top of their wages — not deducted out of.
Using tax tables to calculate wages
Each year, the ATO produces a range of tax tables to help you work out how much to withhold from payments you make to your employees. In our Ad Hoc Payroll Micro Course, we’ve already added the most current tax tables to the accompanying payroll spreadsheet, as well as the superannuation guarantee tables.
Does SuperStream streamline superannuation payments?
If you’re a small business with nineteen or fewer employees, then come July 1 this year you’ll need to begin making superannuation contributions for your staff using SuperStream, the government reform introduced last year to improve the efficiency of Australia’s superannuation system.
The purpose of SuperStream is to ensure employer contributions are paid in a consistent and timely manner, while also setting a common standard for how super contributions should be managed, which had previously been lacking from legislation relating to superannuation contributions. Medium-large businesses with more than twenty employees have been able to use SuperStream since July 1 last year and have until June 30 this year to become compliant. From July 1 this year, small businesses with nineteen or fewer employees will until June 30 2016 to meet the SuperStream requirements for their business.
What’s the benefit to employers?
Prior to the reforms, there was no standard for making super contributions. This meant that employers could choose to make superannuation contributions as frequently or infrequently as they liked, providing they made them at some point over a the course of an employee’s employment with them. SuperStream now makes regular contributions mandatory and easy to comply with. Other benefits to employers include:
The opportunity to use a single channel when dealing with super funds, regardless of how many funds your employees contribute to
Reducing the time spent dealing with employee data issues and fund queries
Offering greater automation and reduced cost of processing contributions and payments
More timely flow of information and money in meeting your superannuation obligations.
What measures will businesses need to adopt to use SuperStream?
Businesses can use software that conforms to SuperStream requirements – MYOB released a software update for most of its products, which is SuperStream compliant, for instance – or a provider who can meet the SuperStream requirements on their behalf. The ATO recommends investigating the following options:
Upgrading payroll software
Using an outsourced payroll function or service provider
Using a commercial clearing house or the Small Business Superannuation Clearing House (for businesses with fewer than twenty employees).
If you employ contractors to work for you, either on a one-off or ongoing basis, you will still need to make super contributions on their behalf, which means you’ll also need to make sure you’re compliant with the SuperStream requirements. You’ll need to make superannuation contributions to a contractor if they have a contract with your business where:
The contract is wholly for labour and skills
They perform the work personally
They are paid for the number of hours worked
In this case, they’re considered an employee for the purposes of the superannuation guarantee, so you’ll need to ensure you’re also compliant with SuperStream, even if that contractor has an ABN and invoices you.
You won’t have to pay the superannuation guarantee for a contractor if the person is hired to complete a specific task for which they are paid to complete only, and they are responsible for fixing any defects to the work.
If you hire contractors to provide mainly labour services on a regular basis, where they are paid for the time they spend working, rather than on a project basis, for the purpose of SuperStream, they will be counted as employees. If you have more than twenty contractors that fit this description, you need to ensure you’re compliant wit SuperStream by June 30 this year; if you’ve fewer than twenty, you have until June 30 2016 to become SuperStream compliant.
It’s a good idea to review the SuperStream section of the ATO’s website for more information on SuperStream or visit the section on contractors if you’re unsure whether you should be making super contribution on your contractor’s behalf.
Make it through July with our End of Financial Year Payroll Checklist.
While everyone else is excited by the prospect of receiving a fat tax cheque from Mr Tax Man, if you’re a bookkeeper you’re probably not so much excited as you are busy. If this is your first time looking after the EOFY analysis for your new business (or maybe you’ve just enrolled in our MYOB course and you’re wondering what you’ll be doing this time next year), we’ve put together an EOFY payroll checklist to help you make it through July.
Get Your Details Up to Speed
Before you get started, make sure you check you’ve got the correct details for each of your employees — check you have the correct addresses and TFNs for all staff.
Also check that employees who have been terminated have a termination date and check the annual leave entitlement flag has “carry remaining entitlement” in MYOB.
Now we can begin!
Reconciliations: reconcile total gross wages payment register, outstanding PAYGW liability, super liability and payroll tax for the year — see the Institute of Certified Bookkeepers payroll tax resource on the ICB website
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Xero is a great bookkeeping program for tradies who are on the go and using their phones (or a tablet) all the time. From receipts scanning to creating quotes and invoices, receiving payments and keeping track of project costs.
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Don’t forget that, while a business loan to cover payroll for 12 months will be easy to repay initially, your business’s profits will need to improve substantially over the next year so that you can continue to meet your loan repayments AND your payroll obligations for that year. 
EzyLearn Excel, MYOB and Xero online training courses count towards 
Most businesses using an accounting program like MYOB or Xero will use the included payroll package to manage their employees’ payroll. For businesses with only a few employees, however, the additional payroll function is an unnecessary expense. 
