What is payroll?

Accounting for payroll is essential to running a business for two major reasons. First, because getting it properly is a legal necessity, especially for tax considerations. Second, if you don’t pay your employees appropriately, they probably won’t continue working for you for very long!

Here are the things you need to know to help you better grasp payroll for your small business.

STP for advisors – 5 things to discuss with staff

Getting your team on board with Single Touch Payroll (STP) should be your first priority if you want the deployment of STP with your practice’s clients to go smoothly and without a lot of stress.

Your workforce has to be well-versed in the changes that will be brought about by the implementation and roll-out of Single Touch Payroll (STP), as well as excited about the new system. The self-assurance they exude and the manner in which they accept it will, in turn, result in favourable outcomes for client engagement, which will ultimately lead to the clients’ continued support.

They need to have a good understanding of:

• What the STP is
• The STP-enabled goods that are being recommended by your practise
• Your organization’s strategy for putting the STP into action and rolling it out.

Educating your workers about STP best practices is the first step towards implementing them successfully. You might also think about designating a member of your staff as the STP Champion for your medical practice. This will ensure that you concentrate on other aspects of your way and give a sense of confidence and empowerment to the rest of your team.

When it comes to the education of your staff on STP, the following five talks are very necessary to have.

1. What is STP?
2. Why is the ATO using STP in the first place?
3. How does STP work?
4. What plans does the ATO and anybody else have for your STP data?
5. What advantages does STP have for your practice and for the team as a whole?

What is STP?

Your customers will be required to disclose their payroll information to the ATO in a new way, thanks to STP.

On the first of July 2019, STP became officially operational for companies who employ 19 workers or fewer.

The ATO acknowledges that accountants and bookkeepers will frequently be assisting their customers with the transition to STP. As a result, they have given you until September 30, 2019, to assist in ensuring that the practice goes off without a hitch for everyone involved.

Imagine that you are unable to collect data from all of your customers by September 30th. In such instance, you can submit an application for a deferral (and in a subsequent post, I’ll explain how to do so, as well as why it truly could be a viable approach for specific customers).

Payroll: What does it mean for small businesses?

At its most fundamental level, payroll involves giving some money with one hand and receiving some other kind of payment with the other. You are necessary to the following:

• Always be sure you pay your staff the appropriate amount at the appropriate time (according to their contract and in line with employment law)
• pay attention to detail while deducting necessary expenses, such as taxes and retirement, from their paychecks.

You may probably guess that there are a number of regulations around payroll. You are required to behave in accordance with a significant number of government regulations.

What exactly does it entail to be compliant with payroll?

You are required to make precise payments and deductions in order to be in compliance with government laws.

• Make sure that you file and pay taxes on time, pay other deductions, such retirement contributions, to the appropriate locations, and keep payroll records for at least seven years if you are an employer. Provide your employee with a thorough payslip that demonstrates what you have done.

For the sake of this article, we will assume that you are familiar with how to calculate the salary for your employees. We will walk you through the deductions that need to be made as well as the reporting obligations.

Why is the ATO introducing STP?

There are three main reasons:

• It makes the playing field more level (the underground economy in Australia is believed to be worth fifty billion dollars).
• It helps secure the superannuation entitlements of employees (there is roughly $2.85 billion of unpaid employee superannuation guarantee), which is a significant benefit.
• The Australian Taxation Office (ATO) is looking to engage with businesses in a manner that is more “modern and digital.”

How does STP work?

When customers run their payroll, the STP-enabled software on their computers will submit the following information to the ATO:

• Gross wages
• earnings subject to PAYG deductions
• Each employee is responsible for paying their own superannuation.
• Then, once your customers have paid their workers’ ages to their respective super funds, the super funds (with the exception of self-managed superfunds) will send the following information to the ATO:
• The time when your customer paid you for the service.
• The amount of money contributed to their retirement account by your customer.

How will the ATO and others use your clients’ STP data?

The ATO will review and compare the information it gets from employers and the super funds that employees have, and it will look for any irregularities and make any required contacts.

In particular, the ATO will be able to determine whether or not the company has paid their employees appropriately and whether payments have been done in a timely manner.

In addition to this, the ATO will communicate information to a variety of government ministries.

The information in your employees’ myGov accounts will be brought up to date with each new payroll, and they will be able to view their year-to-date totals for the following:

• Gross wages
• earnings subject to PAYG deductions
• Superannuation payable
• the portion of their retirement savings that you have contributed to their superannuation fund

Your STP data will eventually be used for compliance and statistical purposes by an increasing number of government entities. This will take some time.

The ATO will first share the data obtained from the STP with Centrelink, Human Services, and Home Affairs.

There are five aspects of payroll legislation that need to be understood.

The specific rules that apply to payroll will change depending on the jurisdiction in which your business is located; nonetheless, the following categories of the law are likely to be in effect no matter where you choose to operate your company:

1. Taxation
2. It is required by law for every business that pays its employees in cash to withhold the proper payroll taxes from those workers’ paychecks and then remit those taxes to the appropriate governmental agencies. In a nutshell, this means that you are acting in the function of tax collector for the members of your workforce.
3. Plans for retirement and medical care are provided.
4. It’s possible that you’ll also be responsible for managing payments for things like social security and healthcare, although the particulars of this responsibility will vary from country to country. Because of this, it is necessary for you to deduct the proper amounts from the paychecks of your employees and, in the majority of situations, also pay the employer’s portion of the contributions. There are circumstances in which they are regarded as fixed costs, and there are further circumstances in which they are computed as a proportion of the basic salary of each employee.
5. Fees and other punishments
6. Imagine that you choose not to pay the required taxes. It is vital to determine the amount of PAYG, payroll tax, and Superannuation Guarantee Contributions (SGC) that is needed and pay them on time so that you may avoid the possibility of receiving a costly fine or another type of penalty if you fail to do so.
7. Reporting
8. Written reports on compliance with employer duties, including PAYG, payroll tax, and SGC, must be delivered to the relevant government authorities as well as your staff members. These reports must detail whether or not the employer has met their obligations. This may need to be done once a week, once a month, or once a year, depending on the regulations that apply in your region.
9. Employees are the ones who receive pay.
10. People you directly employ are legally required to be included on your payroll. In most cases, it does not employ independent contractors, freelance employees, or anybody else who would send you an invoice through their own company. Consult with your accountant whenever you are uncertain as to who is or is not included on your company’s payroll.

In certain countries, you may also be obligated to fulfil other responsibilities, such as contributing cash towards unemployment insurance or ensuring that each employee possesses the appropriate legal authorisation to work in your nation.

What exactly are these “payroll deductions”?

The term “deductions” refers to the sums of money that are taken out of the pay of an employee before the individual is actually paid for their labour. One of the things that are taken care of by the premises are contributions made by employers to employee retirement programmes.

• taxes on benefits payments such as child support and employee income, as well as taxes on benefits payments

Your workers may have additionally made arrangements for extra healthcare insurance, retirement plans, or charity donations to be deducted straight from their salary. They may have organised these deductions. In our guide to employing workers, you’ll find further information regarding these deductions, including the sequence in which you should make them.

What advantages will STP offer your business and your team?

I think that STP will be a game-changer for accounting and bookkeeping procedures and will provide you with a tremendous opportunity to re-design and modernise your strategy.

STP provides a whole bunch of extra benefits, in addition to simplifying procedures in your clinic and enhancing the profitability of your business. One of these benefits is that it gives you and your staff the freedom and flexibility to work away from the office, which can be a huge time saver.

Below, I’ve outlined a number of advantages associated with STP, giving you the opportunity to pick and select the benefits that are most relevant to your organization’s personnel as well as its customers:

• It is a rationale to present customers with a more current method of conducting business, such as migrating their operations to the cloud.
• It’s the ideal method for getting customers more involved with their statistics and getting them to start taking more responsibility for them.
• This is a chance to have a more organised and efficient practice (no more shoeboxes!).
• This presents a chance to have clients of a higher grade as well as to attract new clients of a higher quality. (Get them started in the cloud and teach them good accounting and bookkeeping skills, and you’ll have more time to give value-added services to your clients. In addition, there is a greater possibility that customers may get in touch with you for more advanced assistance.
• STP provides an opportunity to move towards a higher quality of work for your team to be working on. This type of work is so much more gratifying for team members, and it makes greater use of the abilities that they bring to the table.
• It is more probable that customers will maintain their data up to date and won’t be sending in their work at the very last minute. This will result in less stress for you and the rest of your employees.
• As a result, customers will better understand the PAYG and SG responsibilities that are owed to them, which should result in a reduction in the demand for client payment arrangements.
• It presents an opportunity for your workers since they will have less stressful and unrewarding tasks to perform as a result of this change.
• It lessens the likelihood that your clients’ employees may miss out on their retirement benefits.
• Since a result, the likelihood of your customers falling behind on their bills to the ATO will decrease, as the ATO will have procedures in place to contact them earlier than at any other time in the past.
• It is an opportunity for you to rebuild your practice completely, to reset your practice standards, and even to reset your customer base by getting rid of clients and tasks that are not profitable or satisfying for you.

After you have finished the preliminary groundwork and ensured that everyone on your team is familiar with STP and everything that it encompasses, you will be ready to move on to the more practical, “next steps” portion of your implementation strategy and rollout.

You will be required to make a decision on the list of STP goods that you will be recommending, as well as your STP internal processes and price structure.

Because your staff is probably so enthusiastic about the new possibilities and advantages that it will bring to your practice, there is a good chance that they will be able to alleviate any concerns that your customers will have about the upcoming changes. As a result, you will be submitting your very first STP reports in unprecedented quantities.

Notifying the ATO

You are responsible for ensuring that your employees pay their taxes to the appropriate government agency when you are an employer. It would be helpful if you turned over those taxes on the specified date and filed reports with the tax office on a consistent basis. These reports demonstrate to them that you are properly compensating and taxing your staff members.

Under the Single Touch Payroll (STP) programme, you are required to disclose to the ATO on each payroll how much money was paid to your employees, how much tax was deducted, and how much money was contributed to their superannuation accounts. You are required to submit this report using the accounting or payroll software that you are using; alternatively, you can hire a registered agent or payroll service provider to complete it on your behalf.

How to pick a payroll programme

Payroll functionality may be pre-installed in some accounting software or offered as an optional add-on. In addition, there are additional software that are used only for payroll processing that may be used. The criteria of your particular company will determine which one is best for you to go with, but in any case, here are some things to keep in mind:

• Make the most of what you have.
• Is accounting software currently being utilised at your company? Check to see if it comes with already built-in payroll capabilities or if you can add a payroll application. If not, it’s time to get a better version.
• Determine whether or not it is simple to operate.
• Select a payroll package or payroll accounting software add-on that your accountant or financial adviser can also use. Again, maintaining simplicity can help you avoid exchanging files in a variety of formats.
• Get on the internet and make use of the cloud.
• It is prudent to utilise accounting and payroll software that is hosted on the cloud in the modern day. As a result, you have access to all of the information pertaining to your payroll at any time, from any location, and may exchange data with other reliable partners. In addition to this, there is less effort involved in providing IT assistance.
• Check to see whether it can develop alongside you.
• Although you may just have one or two employees at the moment, there is no question that you have ambitious goals. If you have scalable payroll software, you won’t have to worry about upgrading to new systems as your business expands.
• Ensure that it is capable of recording in real-time.
• Be certain that the payroll programme you select maintains records of payroll activities in a precise, current, and accessible real-time manner.
• Get suggestions
• Inquire with your company partners, financial adviser, bank, accountant or bookkeeper, as well as owners of enterprises that are comparable to your own. Check out what suggestions they have.
• Check to see what the criteria are for reporting.
• Investigate the kinds of reports that may be generated using the accounting or payroll software that you have selected. Then, inquire with your accountant about which ones can be beneficial to your company.

Consider looking at other helpful features such as automated tax calculations, management of direct deposits, and handling of timesheets in addition to the suggestions presented here. It is important to consider what you will require and make a decision that is in your best interests since if you make the incorrect choice, it may be difficult to switch from one payroll system to another.

Payroll options for small business

Typically, the complexity of your payroll will increase in direct proportion to the number of employees you have, and this is especially true if you pay some of your workers salaries and others hourly payments. When you calculate payroll, you may obtain different results each time because including independent contractors, employees paid on commision, extra hours worked, expense claims, allowances, and accrued leave entitlements can cause you to get different results.

Payroll processing for a small firm can be handled in a variety of ways, including the following:

• Whether it’s with a pen and paper or spreadsheets: These approaches are used by businesses since they only require a small number of people. However, spreadsheets are often not accepted by the tax office.
• Homemade software: Apps can calculate pay and deductions and even fill out tax forms for you. However, you will be responsible for making the payments on your own.
• Companies that provide payroll services You may outsource your payroll to pros. Some service providers will take care of each and every detail for you. Certain responsibilities will be shared across many people.
• You don’t need to consult a specialised payroll business if you are accountants or bookkeepers. Many accountants and bookkeepers can do payroll for you.

A six-point guide towards a sizable payroll

Having the necessary software is just one piece of the solution to the problems that arise with payroll. The time has come for you to put it to good use! If you spend the time and energy at the outset to correctly configure your payroll system, you will likely save yourself a significant amount of time and frustration in the years to come. Here are some guidelines:

• Register your business
• Make sure that your registered business number is included in all of the paperwork pertaining to your payroll, as well as any documents that you send in to the office of the tax commissioner.
• Take data from your employees.
• Enter all of your employees’ information, including their names, residences, welfare ID numbers, and any deductions they are entitled for, into your payroll system. This includes any and all deductions (if taxes need to be taken out). Include your contact information as well as any other types of recompense you receive, including pay, leave rights, overtime, and any other benefits. Find out what data you are required to have by checking the regulations in your area.
• Prepare the documentation
• Make sure that all of the appropriate tax and superannuation documents are filled out by your personnel and that they are sent back to the tax office. Repeat this process with all of your records.
• Decide on payment periods.
• How frequently will you be making payments to your employees? It may be once a week, once a month, or once every two weeks.
• Continually update
• Plan on having payroll information updated regularly. Do this yourself or get a bookkeeper or your accountant to do it.
• Create an archive
• Think about how you will archive the records that need to be retained for a number of years, as this is a must. Some of this will be taken care of for you by reliable payroll accounting software, but you will still need some paper archives for documents such as tax forms.

Recognise what to do if your compensation changes

Your payroll is not something that is written in stone; rather, it will fluctuate when you hire additional members of staff. When a new worker starts working for your company for the first time, you are legally obligated to ensure that all of the necessary federal tax paperwork is completed and submitted on time.

The payments that you make to the employees who are on your payroll will also differ, and you will need to incorporate these differences in a variety of different ways into your system. The following are some examples that illustrate this point:

• Paid employee
• Received a predetermined wage amount at the end of each pay month.
• Employees that work on a regular or ad hoc basis are paid hourly for a certain amount of hours each week.
• Commission is the fee that is paid for services performed or for the sale of goods or services, and it is often calculated as a percentage.
• A reward given when achievement is seen to be above and above what was expected.
• Additional compensation
• An all-encompassing term can be used to describe termination benefits, back pay, bonuses, commissions, overtime pay, or any combination of these.

Keep a copy of your payroll records

It is a requirement of the government that you keep records of your payroll for a period of seven years. In order for these records to be considered complete, they need to include the following information for each employee:

• the taxpayer’s name, address, and social security number (TFN). Verify that this complies with the laws that are in effect in your country.
• When you were hired
• The day on which employment will come to an end (if not still employed by you)
• A complete listing, including amounts and dates, of all pension, annuity, and salary payments
• Copies of any and all relevant forms that were made available to (and filled out by) the worker
• Specifics of any payments made due to illness or injury, including dates, amounts, and payer information (where applicable).
• The dates and amounts of any tax deposits you made, Copies of any returns you submitted, and their respective confirmation numbers
• Maintain a record of the perks and reimbursements for expenses that your workers are entitled to receive.

There is a possibility that there is more information that you are required to maintain for legal reasons. Find out more information by contacting the Australian Tax Office (ATO).

It is your responsibility to properly process payroll

You have the option of managing payroll operations in-house, contracting them out to an accountant or payroll service, or managing them using a combination of the two methods. In any event, it is the owners of enterprises who are the ones who are accountable for keeping accurate records and presenting those information to the government agencies that are responsible for taxes. As a result, it is absolutely essential to exert the amount of work that is required to get it right.

If you select the appropriate payroll accounting software and configure it correctly, you may make your life much simpler. To ensure that this is carried out appropriately, you should get any assistance from your accountant, the ATO, and Fair Work Australia. If you put in some work now, it will save you a tonne of time as well as a significant amount of money when your company expands, and you hire more personnel.