Employing someone comes with obligations such as paying wages, withholding taxes (known as PAYGW) from their wages and Superannuation Guarantee charge (SGC) among others. While PAYGW has to be reported to the ATO and remitted, SGC needs to be paid into an employee’s eligible superfund.
Also, employers need to consider the Fair Works Act when employing a person. The Fair Work Ombudsman which governs the Act, is an independent statutory agency of the Government of Australia that serves as the central point of contact for free advice and information on the Australian national workplace relations system.
When you decide to take on an employee, here’s what you need to do:
- Check the applicable rates to pay as per Fair Works and obligations around insurance, safety & occupational health and means of dispute resolution, etc.
- Have an Employment contract drawn and agreed upon by you as the employer and your employee
- Take a TFN declaration (there’s a form downloadable from the ATO website), eligible super details and personal details
- Set up payroll on your accounting application through which you will be processing payruns. Payruns could be weekly, fortnightly or monthly. Put in the rate of pay in the software.
- Register with ATO for Single Touch Payroll (STP).
- You could also set up a SGC Clearing House on ATO portal. This allows you to remit the employee’s superannuation into the ATO who then remits it to the relevant superannuation fund.
- Report to the ATO the employee’s wages and PAYGW. This is usually done once a quarter and is reportable on the quarterly Business Activity Statement (BAS).
- Depending on the size of your business and the amount you are withholding, the ATO can ask you to report monthly. If you are reporting monthly, it is called Income Activity Statement (IAS). Ideally, in a financial quarter, you would be required to report the first two months through IAS and the third month along with the quarters BAS. The same BAS form also reports the Goods & Services Tax (GST) you are collecting and/or paying.
- Above a certain threshold, payroll taxes may also be applicable.