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Understanding Your Payroll: A Small Business Guide


While payroll is a crucial aspect of running your small business, it is not always the most glamorous task. This often-confusing task can take many business owners far too much time to complete taking them away from other more critical aspects of the business. While you can always hire a payroll consultant to help you to process your payroll each month, you should still have an understanding of the payroll basics to ensure that your business is meeting all of your obligations. 


To take the confusion out of payroll, you need to take some time to understand what your obligations and responsibilities are. Of course, you need to ensure that your employees are paid fairly and on time. However, you will also need to fulfil your obligations to the ATO so that you don’t get issued with any fines or penalties. With a better understanding of your payroll processes, you will be in more control of your business finances, allowing your company to continue to thrive going forward. 


Continue reading to learn everything that you need to know about payroll as a small business owner. 


Register For Payroll Withholding

Most small businesses in Australia typically register for payroll withholding before they start to pay their employees. If you hire employees, make payments to businesses who don’t quote their ABN or you have voluntary agreements to withhold payments for work completed by people outside of your staff, such as contractors, you will need to register for payroll withholding. Known as Pay As You Go (PAYG), these payments will contribute to your taxable income at the end of the year. 


Gather Employees Details

For all employees on your payroll, you will need to ensure that you have the most up-to-date and accurate information on them. You will need their full name, address and date of birth. You will also need your employees to provide you with bank account information to receive their pay and a tax file number, which they can apply for through the ATO if they do not already have one. Finally, you will need to note their start and termination date for each employee you hire, as well as payment details such as hourly rate, allowances and their hourly rate. 


Set Up Single Touch Payroll

Single Touch Payroll was implemented by the ATO to improve the payroll reporting process, making it easier for the ATO and business owners alike. Many modern accounting software packages integrate seamlessly with STP making it easy for you to share the required payroll information with the ATO. Single Touch Payroll will help you to complete your reporting obligations in relation to salaries, wages, PAYG withholding, and superannuation each time your employees are paid. 


Keep Meticulous Reports

Maintaining meticulous payroll records is crucial in keeping your business finances on track Understanding how much you are spending on wages versus the output from your business during a particular period, can help you to determine how productive your company is. With these records, you will be able to forecast your future needs with more accuracy. 


Payroll Tax

Payroll tax in Australia can be confusing. To put it simply, payroll tax is the amount of tax that your business must pay on payroll to the ATO. Payroll tax scales with the number of employees that you hire and is applied to various thresholds related to your payroll expenses each week. Payroll tax rates are different from state to state so it is important to check the requirements for where your business is registered to ensure you meet your obligations. 


Ensure You Meet Your Payroll Obligations

As a small business owner, payroll can often be confusing, time-consuming and distracting. Getting a handle on your payroll processes and understanding what your obligations are will help you to save time in the future and to stay in control of your business finances. With your payroll operating efficiently you will have more time to focus on the areas of your business where you are most valuable.


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