Posted on

Should You Take Out a Loan to Avoid Delaying Payroll Payments?

Repayments on a business loan may be less than super and PAYG combined

Small business loan to finance PAYG and super
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.

IN A PREVIOUS POST we talked about taking out a business loan to cover payroll if you anticipate that you won’t have enough funds to do so otherwise.

Naturally, it’s always better to use your business’ own funds to meet your obligations, whether it’s paying staff or suppliers. This said, getting a business loan to cover payroll can be a good idea for small and growing businesses in certain circumstances. We look at these now.

Loan repayments are usually small

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

taking out a small business loanDon’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.

***

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.


 

learn excel online training course
Our online training courses feature real-life case studies to make our learning more relevant and true to life.
Posted on 1 Comment

Turn Your Wage Payments into a Business Loan

Only Managing Payroll on an Ad Hoc Basis? We Show You How

managing ad hoc payroll
If you know that you can’t quite make payroll, a short-term business loan may see you through and avoid penalties.

WE’VE RECENTLY UPDATED THE course content in our Intermediate Microsoft Excel training courses to include a workbook and spreadsheet (that you can use in your own business) showing you how to manage ad hoc payroll using Microsoft Excel. This will enable you to calculate your PAYG and superannuation obligations in Excel.

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.

When you can’t make payroll

If you’re finding it a stretch to make payroll payments, don’t worry, you’re not alone. Lots of business owners have trouble making payroll. But there are things you can do about it. We find that it frequently comes down to poor credit management processes or perhaps a downward trend in a business’ cycle that’s been missed due to poor or inefficient accounting processes. All of these can be rectified.

If the reason your business can’t make payroll is due to one or more shortcomings in your business’ operations, remedy the problems now. Similarly, if credit management is the issue, and late-paying clients are partially to blame, then tighten up or implement a credit management process. If it’s the result of bookkeeping that’s not up-to-date, find a bookkeeper to manage this for you.

How you can make payroll when cash is tight

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.

***

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.


Xero online training course

At EzyLearn we offer online training courses to help you up-skill and find employment. Choose from our range of cloud-based online accounting software courses, to business start up and management courses, to marketing and sales courses, or update and further your skills in a range of Microsoft Office programs (ExcelPowerPointWord) or social media and WordPress web design). 

All of our online training courses can also be counted towards Continuing Professional Development points.


 

Posted on 3 Comments

What Happens if You Have Backlog of PAYG and Super Payments?

Don’t get lumped with penalties when you don’t need to!

failure to lodge penalties how to manage payroll in Excel online training course
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.

Rescue bookkeeping

A backlog of PAYG and super payments that date back more than three months is known as rescue bookkeeping, although it can often include other bookkeeping issues, like bank accounts that don’t reconcile with statements.

PAYG payments

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 Courses to 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.

Our courses now include real-life case studies

learn excel online training course

Our Intermediate Microsoft Excel training courses will also teach you how to create a payroll spreadsheet from scratch to suit your own business, so you can easily work out your PAYG and super obligations. Visit our website for more information on all of our Excel training courses.


learn PowerPoint online training course

Create brilliant presentations and graphics for all kinds of business purposes.

Gone are the days of excruciatingly dull PowerPoint slide presentations. Nowadays PowerPoint is the hidden gem used to generate animations, videos, movies, advertising and graphics. It’s a great ally to the marketer or social media person in your organisation.

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.


online bookkeeping courses to earn cpd pointsEzyLearn Excel, MYOB and Xero online training courses count towards Continuing Professional Development (CPD) for bookkeepers and accountants. We’ve been an accredited training provider of the Institute of Certified Bookkeepers ever since the organisation started in Australia. Find out how CPD points can be of benefit to you.


 

Posted on 1 Comment

Calculating PAYG Obligations Without a Payroll System

Third Quarter is Looming; Are You Up to Date with Payroll?

ad hoc payroll payments ExcelMost 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.

In our recently updated Advanced Microsoft Excel training courses, we have included a micro course on ‘Ad Hoc Payroll’, featuring a detailed spreadsheet for calculating PAYG and superannuation obligations. In this instance, our micro course is a detailed spreadsheet based on a case study, so it’s relevant and applicable to real life.

PAYG and the businesses it applies to

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.

***

We feature a number of real-life case studies, which we have turned into micro courses. You can use the Ad Hoc Payroll Micro Course to determine the rate of PAYG tax to withhold and the required super contribution amounts in Excel, rather than paying to access the payroll functions of MYOB or Xero. Our Intermediate Microsoft Excel training courses will also teach you how to create a payroll spreadsheet from scratch to suit your own business. Visit our website for more information on all of our Excel training courses.

***

online bookkeeping courses to earn cpd points

 

EzyLearn Excel, MYOB and Xero online training courses count towards Continuing Professional Development (CPD) for bookkeepers and accountants. We’ve been an accredited training provider of the Institute of Certified Bookkeepers ever since the organisation started in Australia. Find out how CPD points can be of benefit to you.

 

 

 

 

 

Posted on 2 Comments

What is SuperStream?

Does SuperStream streamline superannuation payments?

SuperStream Superannuation Start Dates for small businesses with under 19 employees and contractorsIf 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).

We haven’t made any updates in our MYOB Training Payroll Course for this, but we’re keeping a watchful eye.

What if your business mainly uses contractors?

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.

Posted on 1 Comment

Survive 30 June: EOFY Payroll Checklist

checklist
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!

  1. 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
  2. Print Reports: print payment register summary and payroll entitlement balance sumarry/detail
  3. Reconcile PAYG Withholding: see Insitute of Certified Bookkeepers payroll checklist resource
  4. Prepare Payment Summaries: remember salary sacrifice and ensure you send magnetic media form and EMPDUPE file to the ATO by 14 August
  5. Rollover Payroll Year: backup payroll file and store in payroll folder, rollover year to the next payroll year and load new tax tables
  6. Superannuation: don’t forget that the superannuation guarantee increased to 9.25% from July 1 2013.

For more tips to help you through EOFY analysis, see our EOFY checklist or visit the Institute of Certified Bookkeepers website. Happy EOFY!