Tax return for small business

Posted on June 16, 2022 by Angus Jones

If you are paying taxes, you are making money. All small businesses have tax and reporting obligations, and this guide will help you understand what is required to do a tax return for a small business and where you can get help.

A tax return is the completion of documentation that calculates a business’s income earned with the amount of tax payable to the Australian Tax Office (ATO).

WHY should you do a tax return?

It’s the law
You may get a refund
It helps you understand the true position of your business

Irrespective of your business structure, you must submit an annual tax return. Sole traders and partnerships will be taxed at the individual income rates as part of your personal income. Companies must lodge a tax return as a separate legal entity and pay tax at a rate of 26% (in 2020/21 dropping to 25% in 2021/22 details here) of every dollar earned.

WHAT do I need to understand about small business taxation?

Your taxable income = assessable income – deductions

Assessable income is your total earnings before tax from an everyday business source such as sales and other business activity like capital gains. It does not include GST.

Deductions are any expenses incurred in running your business.

Sole traders must include any salary or wages in their tax returns, and the ATO will calculate if any tax is owing or a refund is due. A sole trader not paying themselves a salary, including PAYG withholding tax, is likely to receive a PAYG instalment for estimated income to be earned.

Partnerships must lodge a partnership tax return. Then as an individual partner, you must lodge an individual tax return for your share of income or losses. The partnership does not pay income tax; rather, the partners themselves do.

Trusts and beneficiaries must lodge a trust tax return. Then as an individual trust beneficiary, you must lodge a company or individual tax return for your share of income or losses.

Companies lodge a company tax return and pay company tax on assessable income. Companies might pay PAYG (pay as you go). The ATO will inform you if you need to pay PAYG instalments; however, as a general guide, expect to pay it if your assessable income exceeds $2 million. PAYG is a means to collect tax throughout the year versus waiting until the end of the financial year. You can also make a voluntary payment or apply for a variation if you feel your circumstances have changed.

HOW do you lodge a tax return?

A tax return should be lodged by 31 October for the previous year. Exceptions may apply if you use a registered tax agent or file a company tax return. A tax return must be lodged every year you run a business, even if you don’t expect you will have to pay tax.

You can lodge a tax return:

By paper
Online via myTax if you are a Sole Trader
Via a registered tax agent
If you are a company, trust, or partnership by standard business reporting (SBR). See our guide on accounting software

If you are required to pay PAYG on your business earnings, this will become part of your BAS reporting and payment requirements. More details on this can be found in our BAS guide. The benefit of having PAYG is that tax is paid during the year, and you can budget to make these payments rather than having a large lump sum payable at the end of the year.

After you have lodged an electronic tax return, the ATO aims to finalise the return in approximately two weeks. The ATO warns that processing may be delayed if there are incorrect or incomplete details in your return.

When completing your income and deductions for business:

keep accurate and complete records of your assessable income and expenses
use the correct method for calculating and reconciling the amounts you claim
report all income and deductions to ATO at the right time
pay any amounts owed on time
only use valid business deductions
- the expense must have been for your business, not for private use
- if the expense is for a mix of business and personal use, you can only claim the portion that is used for your business
- you must have records to prove it

Types of expenses that are not deductible include entertainment expenses, traffic fines, and private or domestic expenses such as childcare fees or clothes for your family. GST cannot be claimed as an expense if you have already claimed it as a GST credit.

If a prepaid expense exceeds $1000 and you will not receive the goods or service within 12 months, or it is not eligible for an immediate deduction, the expense will need to be apportioned over time.

A capital expense for items such as machinery or equipment will normally be needed to be apportioned over time.

HINTS

The Australian Tax Office provides an online search engine to assist small businesses http://www.sba.ato.gov.au/

You can also book an after-hours phone call http://www.sba.ato.gov.au/Forms/Book-an-after-hours-call-back—small-business-support/

The ATO provides an app providing tax and super information and tools https://www.ato.gov.au/General/Online-services/ATO-app/

If you employ people, you will also have PAYG withholding tax payments you will need to make from your workers’ wages. See our guide on payroll.

SUMMARY – PAYG small business tax

You must pay tax on your assessable income minus deductions. The way you submit a tax return is based on your business structure. You will likely pay PAYG tax in instalments throughout the year, with your tax return determining if any further payments are required or if you are due a refund. Accurate records must be maintained; deductions will only be accepted for valid business deductions.

ATO turns on Online services for business

Posted on April 23, 2021 by Angus Jones

The Australian Taxation Office (ATO) has flicked the switch on for its new service Online services for business, replacing its existing Business Portal.

The change makes Online services for business the ATO’s default service for businesses that interact directly with the ATO online.

ATO Deputy Commissioner Deborah Jenkins said, “The Business Portal has served us well over the last 17 years, but it’s time to replace it with a much more contemporary service that’s been developed with business, so we know they’ll enjoy using it.”

“We’ve done extensive testing with clients. In the spirit of designing with the end-user in mind, many businesses have been involved in developing the service from the very beginning. We are grateful for the valuable feedback we’ve received. We’ve made many tweaks and improvements to the service as a result and continue to work through how we can further improve the experience for all businesses as they transition to our online platform.”

The new service makes it easier for businesses to interact with the ATO online and provides a secure channel to manage their tax and super obligations. It can be accessed on multiple devices, including on devices like your smartphones or tablets.

In addition to providing the services available in the Business Portal, Online services for business allows users to access new services including:

•               view and print tax returns and income tax history
•               create payment plans
•               switch between your businesses with a single login
•               customise your homepage
•               access new secure mail subjects.

“The new time-saving features include the ‘switch ABN’ function, which allows clients to easily move between the businesses they manage without having to log out and back in again. Businesses have also told us they love being able to organise a payment plan with us online using the service rather than calling us, which saves them precious time,” Ms Jenkins said.

“We’ve seen a great increase in participation from small business owners making the switch to the new service. Businesses in the professional, scientific and technical services and construction sectors have been quick to jump on board. We’d like to see more of manufacturing, retail trade, health care and social assistance businesses also start using the service”.

Businesses can start using Online services for business by logging in with their myGovID as they did for the Business Portal. Those new to our online services, will need to set up a myGovID and be linked to their organisation through Relationship Authorisation Manager.

“We understand this year has, and continues to be, challenging for many clients. We know businesses have a lot on their plate. So we will maintain the electronic superannuation tool (eSAT) and Business Portal for a transition period over the coming months to help users adjust to the new service. We are here to support businesses through this transition and whilst the new service will ensure an improved experience across a range of services. It is important to note that it is not a replacement for the professional advisory services provided by tax professionals,” Ms Jenkins said.

For information about Online services for business, including how-to guides, visit www.ato.gov.au/OSB.

Small Business Answers guide to tax returns can be found here.

Temporary full expensing

Posted on March 31, 2021 by Angus Jones

Following the COVID support instant asset write off available for small business in 2020, the Australian Government announced in October 2020 Temporary Full Expensing which allows a business to temporarily write off business assets in full.

The Australian Government has announced a temporary measure to allow businesses to claim an immediate deduction for the full cost of eligible capital assets.

WHY should I care?

This means you can write an eligible asset off in one year versus over the useful life as deemed by the Australian Tax Office. For example, a bar refrigerator in a restaurant normally would need to be written off over 10 years, under this measure the fridge’s cost can be written off against your business assets in one financial year.

WHAT do I need to know about temporary full expensing?

The eligible period is for the 2020-2021 and 2021-2022 taxation years and is for assets first held between 6 October 2020 and 30 June 2022. Thus, it is currently scheduled to end June 30th 2022. Your business must have an aggregated turnover of less than $5 billion, and you cannot make any other claim under other depreciation rules.

You may deduct the business portion of the cost of eligible new depreciating assets and the cost of improvements to existing assets. This measure also is available for 2^nd hand assets if your turnover is below $50 million.

Suppose your business makes a loss for the financial year after claiming a full expensing deduction. In that case, you can carry your loss forward to use in future taxation years.

If you wish to depreciate a vehicle, you have a limit for a car of $59,136 in the 2021 financial year. Commercial vehicles with either the ability to seat 9 people or more or have a load capacity of 1000kg or more have no limit.

HOW do I fully expense a capital item

You will be able to fully expense an asset within your 2021 tax return via forms that will be available from July 1st 2021.

From our earlier example, if the new bar fridge bought in March 2021 cost $3,000 and was used 100% for business, the $3,000 cost could be included in the 2021 tax return as an expense versus only $300 if temporary full expensing was not available.

Small businesses that elected to apply simplified depreciation rules have been given an amnesty allowing them to take advantage of temporary full expensing.

HINTS

More information is available from the tax office here.

Your accountant can assist with the process.

More information can be found about completing a tax return in our guide on a small business tax return.

SUMMARY – Temporary full expensing

This is a great initiative by the Australian Government, which not only benefits your expense deductions but may also have a flow-on effect of increasing your sales if you sell items likely to be depreciated by other businesses. This temporary measure allows your small business to expense a capital item in the current financial year rather than over several years. You can claim this simply through your end of a financial year tax return.

Finances tips when self-employed

Posted on March 12, 2021 by Angus Jones

Working for yourself and running your own business provides many advantages, including creative freedom, independence, and the flexibility of managing your own schedule. At the same time, self-employment comes with great responsibility.

The somewhat unpredictable nature of self-employment requires you to manage your money well. The sooner you get on top of your business finances, and by extension, your personal finances, the greater your chances of running a successful business.

Leading Australian life insurer TAL’s Head of Financial Health, Jo Hetherington, shares five tips to help make self-employment work for you.

1. Explore your options when it comes to deciding on your business structure

One of the key decisions you’ll make when starting a new business is what structure to operate under. Would it be best set up as a sole trader business, a partnership, a trust or a company structure? Your business structure identifies how you operate and will be dependent on the size and type of your business, your plans to expand the business, and your personal circumstances.

It’s essential to choose a business structure that enables you to reach your unique goals. It can affect things like who is making the critical decisions, tax advantages and disadvantages, how profits and losses are shared, and any legal obligations.

It’s a good idea to seek expert advice and discuss your proposed structure with an accountant or a financial adviser.

For more finances tips when self-employed, see Small Business Answers guide to choosing a business structure

2. Consider the value of insurance

To ensure you’re protected, most self-employed people should consider a variety of insurance, such as business buy/sell, loan or key person insurance, public liability, and public indemnity.

As the owner of your own business, you are your most important asset. It’s important to consider how you or your business would survive financially if you had to spend months, or longer, out of business because of an unforeseen circumstance like an illness or accident.

Further, income protection and business expense insurance needs should be considered. These could help you stay on top of your business and personal expenses if you could not work temporarily, giving you time to focus on your recovery.

For more finances tips when self-employed, see Small Business Answers guide to business insurance

3. Stay on top of your taxes

A key consideration for self-employed people is to understand what you owe the government and what you can claim. To avoid any tax-time surprises, periodically review and think about your taxes throughout the year, not only at tax time.

Be sure to take advantage of any government support that may be available to you. For example, you may be eligible to buy equipment for your business needs and access cash flow benefits from the Federal Government’s Instant Asset Write-Off Scheme. Eligible businesses can claim an immediate deduction for the business portion of an asset’s cost in the year the asset is first used or installed ready for use. As of January 2021, instant asset write-off is only available for small businesses with a turnover of less than $10 million. The threshold is $1,000.

Suppose you do have a particularly complicated tax component to your business. In that case, you may also want to find a tax accountant to help you keep tabs on your taxes.

The Australian Government Business Website has a range of information, grants, services, and support from across government to help your business succeed.

For more finances tips when self-employed, see Small Business Answers guide to the tax return for small business

4. Keep your cash flow going

Cash flow is the backbone of your business.

It is up to you to keep money aside. Regularly setting aside a little extra will help you manage during any quiet periods or if something unexpected pops up.

To help with your cash flow, try to bill early and collect quickly. You can do this by encouraging your customers to pay on time (or even earlier) by offering incentives to reward early payment. Creating invoices that are as clear and detailed as possible can also guard against late payments.

For more finances tips when self-employed, see Small Business Answers guide to record-keeping

5. Don’t underestimate your expenses

To get you started on the right path, you should be looking for ways to streamline your expenses. Focusing on spending only on what you need at the time will allow you to avoid overcapitalisation.

For example, when investing in facilities and equipment, it’s best to start small and take your time comparison shopping before choosing vendors or service providers that can provide you with the best possible deal.

Being your own boss also means that you need to be responsible for keeping your financial records up to date. Be sure to keep accurate records so you can confidently navigate your books in the long run.

For more finances tips when self-employed, see Small Business Answers guide to expense management

Leasing vs Buying Equipment

Posted on February 17, 2021 by Angus Jones

Setting up or expanding a business can be an expensive exercise. To provide yourself with the tools and equipment you will have to either buy items or lease items. Almost anything can be leased from office equipment to machinery and tools. This guide will help you consider the choice between buying and leasing as well as providing further knowledge around the process of leasing.

Leasing of plant and equipment is obtaining the use of machinery, vehicles, or other equipment on a rental basis. This avoids the need to invest capital in equipment. Ownership rests in the hands of the financial institution or leasing company, while the business has the actual use of it.

If you do not have the available cash, further details on ways of acquiring finance can be found in our guide on Financing.

WHY should I lease versus buy?

To understand which is best in your situation it is best to understand the various advantages and disadvantages of each.

Leasing advantages include: making lower monthly payments rather than buying upfront, getting a fixed financing rate instead of a floating interest rate, benefiting from tax deductions on leasing costs, conserving working capital and avoiding cash-devouring down payments, and gaining immediate access to the most up-to-date business tools. The equipment also shows up on your income statement as a lease expense rather than a purchase. If you purchase it, your balance sheet becomes less liquid. The leasing company may also be responsible for repairs saving you maintenance costs.

Leasing disadvantages: You may pay a higher price over the long term versus buying. Leasing commits you to retain a piece of equipment for a certain period, which can be problematic if your business is unstable. Some brands or models may not be available to lease.

Buying advantages: Allows you complete control over your purchase including selection, modifying, and selling the asset for cost recovery. You can control repairs and service intervals. In certain cases, you can claim depreciation as a tax deduction. No agreements or contracts to agree to.

Buying disadvantages: Requires you to have cash flow and might force you into buying a cheaper model. If technology is outdated you have no easy upgrade path other than selling. Unless a warranty or insurance policy exists, repairs and maintenance will be an additional expense.

WHAT do I need to understand about leasing?

If you are just starting a business you may find it difficult to lease equipment. Lease companies will look at your lack of credit history but may consider your personal rather than business credit history during the approval process.

There are four types of equipment leases:

Finance Lease: Ownership of the equipment is with the business. It is on-balance sheet. Lease payments are tax-deductible. At the end of the lease, the equipment is returned to the Lessee or purchased by the business for an agreed price.

Operating Lease (Rental): Ownership of the equipment remains with the Lessor (it is off-balance sheet). Financing payments are tax-deductible. At the end of the lease, the lessee returns the equipment to the lessor or purchased by the business for an agreed price.

Commercial Hire Purchase: Equipment is owned by the business and it is treated as on-balance sheet finance. Only the interest portion of the payments is tax-deductible. The business can claim depreciation deductions on the equipment. At the end of the term, the equipment remains with the company. Sometimes there is a residual value payment required.

Chattel Mortgage: Equipment is owned by the business and the interest component of the payment is tax-deductible. The business can claim depreciation deductions on the equipment. This is a traditional secured loan where the equipment acts as security for the Lender. At the end of the finance term, the borrower remains as the owner of the equipment.

Watch for balloon payments, here you make small monthly payments with a large payment at the end. While this allows you to conserve your cash flow, the final balloon payment may be more than the equipment is worth.

If your lease requires you to return the equipment at the end of the lease and it’s worth less than the value established in the contract, you may be responsible for paying the difference. Also, watch for additional charges such as wear and tear.

HOW to buy or lease equipment?

Buying equipment is fairly straight forward however when selecting the right product you should consider:

What you need both now and in the future?
Would it be more cost-effective to have someone else’s plant or machinery do the task for you?
Do you have the right environment or space to operate this product?
Is the quality or reliability of product critical and does the extra cost make sense?
Do you need to buy new or will 2^nd hand work?
How easily and/or quickly can the product be repaired or serviced?

If you decide to lease, the above list also applies. You can secure an equipment lease through:

Banks and bank-affiliated firms. Banks may offer advantages, like lower costs and better customer service. Check whether the bank will keep and service the lease transaction after it’s set up.
Equipment dealers and distributors can help you arrange to finance using owned leasing subsidiaries or an independent leasing company.
Independent leasing companies.
Commercial leasing broker. Much like mortgage brokers, these people charge a fee to act as an intermediary between lessors and lessees.

HINTS

Every lease decision is unique, so it’s important to study the lease agreement carefully. Compare the costs of leasing to the current interest rate, examining the terms to see if they’re favourable. What is the lease costing you? What are your savings? Compare those numbers to the cost of purchasing the same piece of equipment, and you’ll quickly see which is the more profitable route.

SUMMARY – Leasing versus buying equipment

There are advantage and disadvantages of both buying and leasing. Make sure you:

Understand the tax consequences.
Make sure the product and the financing meets your needs.
Understand what the implications are at the end of a product’s useful life or the end of lease terms.

Your accountant should be able to advise you in these matters if you require additional assistance.

Bank account for small business

Posted on July 14, 2020 by Angus Jones

You have started your new business, you open your wallet and pull out some cash, and you wonder is that my money or some petty cash from my business? Even if you have chosen to be a sole trader it’s a great idea to open a bank account, if you are any other business structure you must have a business bank account for tax purposes. Once you do it opens up the ability to articulate which money belongs to you and which to the business. This guide will help you understand the benefits of having a business bank account and help you understand what you should consider in selecting an institution.

A bank is a financial institution that accepts deposits and recurring accounts from the people and creates demand deposit. Lending activities can be performed either directly or indirectly through capital markets.
Wikipedia

WHY have a separate Business Bank account?

When running a business you must keep account of business transactions and a bank account is a great way to have an auditable paper trail.

A separate business bank account will help you to:

Clearly show your business finances separate from your personal finances
Analyse your cash flow
Monitor your business income and expenses
Extract information needed to meet your tax and reporting requirements
Get detailed records of your business transactions. These can be downloaded to a spreadsheet or imported to an accounting package.

WHAT else can you do with a Business Bank account?

If you have a credit card attached to your business bank account and do most of your transactions through your credit card, your bank statements will, in effect, be a checklist of those expenses.

Some banks offer overdraft facilities, essentially providing a loan facility to go into a minus balance.

To open an account you will need an ABN and ID documents of an authorised owner or director of the business.

HOW to choose a business bank account?

So which bank should you choose? In fact you may not choose a bank, it may be a building society or credit union. The answer is the one that suits you best and you should consider these points when making your decision:

What are the fees and charges?
Do they offer merchant facilities like EFTPOS?
Are their interest rates competitive if you need to borrow?
Do they cater to the needs of small businesses and do they have offers/solutions to suit?
Is there a local branch in case you need to visit?
What is their online banking interface like and will it integrate with your accounting package?
What information is reported on each transaction?
What security measures do they offer for online transactions to protect your business?
How fast do they transact instructions and until what time at night?
Do they offer foreign transfer arrangements and what are the charges?
Can you have access to your own bank manager or business banking specialist?

For more information and comparing various bank accounts visit
https://www.finder.com.au/business-banking

For taxation purposes, the ATO provides the following guide on record-keeping https://www.ato.gov.au/Business/Record-keeping-for-business/Detailed-business-record-keeping-requirements/Running-your-business—records/Banking-records/

Here you will find useful information such as the requirement to keep records for 5 years including the period of review. For example, did you know that if you did your 2015 tax return in 2016 you would need to keep your 2015 tax records until 2021.

HINTS

Regularly bank all the cash your business receives so your income and expense information is always up-to-date and you can easily reconcile your accounts and analyse your cash flow

Register for online banking – this may simplify your record keeping and bank reconciliation process as you can:

easily get detailed records of your business transactions
download financial information from your online account to your accounting package
identify extra transactions in your account including bank fees or interest charges, and direct debits and credits
check and record any errors or omissions

Regularly reconcile your bank records, which may help:

you be more confident that your records contain all the information you need to prepare your tax return and activity statements
you to better understand your cash flow
reduce the time it takes to prepare your activity statements or tax returns

SUMMARY – Small Business Banking

Unless you are a sole trader you must open a business bank account. It will help you manage your finances and different providers will have an offer to suit your needs. Always check to see what other services the bank may be able to offer your business.

A handy comparison of bank rates and fees is available here to help you compare. https://www.finder.com.au/business-banking

Payroll – paying employees

Posted on July 14, 2020 by Angus Jones

Within your small business, people are your most valuable resource but unless they are a family member they are unlikely going to work for free. This means that you will need to pay them. That sounds easy but you have to deduct income tax, pay superannuation, accrue holiday and sick leave and the list goes on. In this guide, we will look at payroll requirements, explain how you pay tax, and look at some of the solutions to make it easier.

There are 10 minimum entitlements you have to provide to all employees called The National Employment Standards (NES). The 10 minimum entitlements of the NES are:
Maximum weekly hours.
Requests for flexible working arrangements.
Parental leave and related entitlements.
Annual leave.
Personal/carer’s leave, compassionate leave, and unpaid family and domestic violence leave.
Community service leave.
Long service leave.
Public holidays.
Notice of termination and redundancy pay.
Fair Work Information Statement.
Note there are some exceptions for casuals. More details can be found on the NES website

WHY should I care about payroll?

The payroll process is important as a small business need to do two things:

Pay employees the right amount at the right time, every time. Fairwork provides a base pay calculator which can be found here. https://calculate.fairwork.gov.au/FindYourAward
Withhold the appropriate amount of tax, provide that to the Australian Tax Office with the required reports, and as part of this keep accurate records. You also need to provide the employee with a payslip and keep records for 7 years.

WHAT you need to know about Payroll and Tax

Three types of tax must be paid:

PAYG withholding – Pay As You Go tax is the employer assisting the employee meet their end of year tax liability. You must register to start the process, you must ensure the worker is entitled to work in Australia and you must withhold the tax every time you issue payment to your staff. Details on how to pay this tax can be found later in this guide. More details can be found on your obligations here. https://www.ato.gov.au/business/payg-withholding/
Payroll Tax – This is a state-by-state tax and is a tax on your business not the employee. It is calculated as a percentage of your total wage bill once you exceed a certain threshold. Further details can be found here. Threshold and payroll tax rates, as well as payment requirements, can be found here:
1. ACT Revenue Office
1. Northern Territory Revenue
1. NSW Revenue
1. Business Queensland payroll tax
1. Revenue SA
1. State Revenue Office of Tasmania
1. State Revenue Office Victoria
1. WA Office of State Revenue
Fringe benefits Tax – FBT is a tax that employers pay when they provide certain benefits to their employees, including their employees’ family or other associates. The benefit may be in addition to, or part of, their salary or wage package. More details and how to pay can be found here https://www.ato.gov.au/General/Fringe-benefits-tax-(FBT)/ A common example of this may be FBT payable on a company car used for work and pleasure.

A further requirement in the payroll process is the payment of Superannuation. If you pay an employee more than $450 a month then you must contribute a further legislated amount to an employee’s chosen superannuation fund. https://www.ato.gov.au/Business/Super-for-employers/

Leave is also an entitlement that must be calculated but is not compulsory on the payslip. The types of leave include:

Annual Leave – workers accumulate leave from the day they start at a rate of 4 weeks for every 12 months worked. It does not apply to casuals and should be accrued in your accounts so you know that you have a debt that must be paid at some time.
Parental Leave – Also known as Maternity leave, it is an entitlement of leave when a child is born or adopted. To be eligible you must have worked for at least 12 months for your organisation and the leave is up to 12 months unpaid. https://www.fairwork.gov.au/leave/maternity-and-parental-leave
Sick and carer’s leave – Full-time and part-time employees can take paid leave to help with personal illness or injury, caring responsibilities, and family emergencies. Employees are entitled to 10 days of sick leave for every year of service. Casuals get none. https://www.fairwork.gov.au/leave/sick-and-carers-leave/paid-sick-and-carers-leave
Public, Religious, and cultural holiday – Employees are entitled to paid leave on Public holidays that fall on a normal working day. Religious and cultural holidays do not have entitled leave however if you do not allow employees to celebrate these it can be discrimination. A simple solution is to celebrate them together through work events.
Long service leave – Employees get long service leave after a long period of working for the same employer. Most employees’ entitlement to long service leave comes from long service leave laws in each state or territory. https://www.fairwork.gov.au/leave/long-service-leave
(Casuals are entitled to LSL in some states and territories)

Allowances and deductions may also form part of the payment process with additional funds provided for uniforms or travel, normally the subject of some sort of award. https://www.fairwork.gov.au/awards-and-agreements/awards Deductions may include a car lease payment or an extra employee-contributed super payment coming out of their scheduled pay.

HOW do you pay an employee properly?

The more employees you have, the more complex your payroll becomes. You might have a mix of employees on hourly wages and salaries. Throw in some contractors, staff on commission, overtime, expense claims, allowances, and leave entitlements, and your payroll can be different every time you run it. Your options are:

By hand: Either on paper or a spreadsheet. Note this may not meet tax office requirements.
Payroll software: Apps can calculate pay and deductions and even fill out tax forms for you. Be sure to read our essential guide on payroll software.
Payroll service providers: You can outsource your payroll to experts. Some providers will do absolutely everything for you. Others will help with specific tasks.
Accountants and bookkeepers: You do not have to go to a specialist payroll company. Many accountants and bookkeepers can do payroll for you.

Now that you have managed to work out how to pay your employee you also have to report and pay the Australian Tax Office. You will have to abide by the Single Touch Payroll reporting guidelines. https://www.ato.gov.au/business/single-touch-payroll/in-detail/single-touch-payroll-employer-reporting-guidelines/ You will report to the ATO every payday how much your employees were paid, how much tax was withheld and what contributions were made to superannuation.

HINTS

Be sure to read our essential guides on Superannuation, roster management, and Payroll software.

SUMMARY – Adhere to Government Regulation around Payroll

Paying an employee is a complicated process with government regulation around conditions, awards, and taxation. It is important that you understand and follow the regulation and ensure your employees are paid the right amount on time every time.

There are lots of great tools and assistance available to help make this process easier.

Payroll Software – simplify paying people

Posted on July 10, 2020 by Angus Jones

our guide on payroll we discussed the process of paying an employee. Part of that discussion was the actual calculation and processing, we discussed options like using a third party or using software to do it yourself. In this guide we will review what you need to consider in selecting a Payroll software solution.

Chances are if you are considering payroll software you already have or are also considering an accounting package solution. Either way you are best to ensure the solution is either built into the accounting package or can be integrated. This will save you lots of time. See our essential guide on accounting software solutions.

Small business payroll software is a solution used in-house that helps you streamline and automate payroll processing tasks. The software saves time and effort through automation as well as reduces errors vs doing manually. It often includes modules for time tracking, tax filing, and benefits administration.

WHY do I need software to do my payroll?

Benefits of Small-Business Payroll Software

Automation of processes
Reduced labour costs associated with payroll processing
Greater accuracy and lower risks eliminate the possibility of human error. The software can also remind you of deadlines, so reduce your risk of fines.
Integration with existing software, for example, accounting packages or POS systems
Some packages will provides updated tax tables when the legislation changes so that the right PAYG Withholding is used.

WHAT you need to know about the ATO and Single Touch Payroll

As a small business in Australia you need a package that will comply with the Australian Tax Office Single Touch Payroll (STP) https://www.ato.gov.au/business/single-touch-payroll/in-detail/single-touch-payroll-employer-reporting-guidelines/. Larger business may consider a package that includes other HR functions but it is unlikely a small business you would consider this. Like the accounting, POS, and eCommerce software solutions the Payroll solution is most likely to be cloud-based bringing functionality at a reasonable price.

HOW do I make a decision on which Payroll Software

Features you should consider:

Designed for the Australian Tax System and reporting requirements
Performs Single Touch Payroll reporting
Direct deposit functionality into employees’ bank accounts
SuperStream standard compatibility for Superannuation compliance
Ability to integrate with other cloud-based software solutions you are using. This will reduce the workload
Additional information can be printed on the employee payslip such as annual leave owing
The ability to support employee deductions or allowances for example, car leasing or uniform allowance
Leave management including annual, sick, and long service
Employee portal to update banking details or enter leave
Mobile access from your smartphones, both for administration and employee
If employees clock on and off, the ability to integrate this process
Flexibility to handle employment options including variable hours, bonus payments, contractors, etc
New hire integration without external assistance
Reporting functionality including leave reporting
Alerts or reminders, for example, payment was not successful or Super payment is due
Security. Remember all your wage information is on the cloud. Consider in which country the information is hosted
Legislation updates. How quickly will the software be updated to abide by any new Government legislation?
Support. Various support or training might be available either included or at a cost.
Cost and cost of extra features

HINT

Make sure your software choice will does not have any compatibility issues with your and your employee’s bank account intergration. Also ensure the bank will process payments overnight so employees can draw cash the next day.

SUMMARY – Easy Payroll

This software can be accessed inexpensively and will make your life easier. More info on vendors can be found by searching for small business payroll software Australia.