Pay As You Go Tax Collections

PAYG A single, integrated system for reporting and paying withholding amounts and Income tax installments on business and investment income.

PAYG A single, integrated system for reporting and paying withholding amounts and Income tax installments on business and investment income.

Payments to employees, company directors and office holders. Withholding PAYG withholding applies to payments to workers (and others) directly involved in a business. These include: Payments to employees, company directors and office holders. Payments under a labour hire agreement. Payments under voluntary agreements. Slides prepared by Peter Miller National Core Accounting Publications

Employee v sub contractor. Payments to Employees Who is an employee? Employee v sub contractor. ATO website decision tool http://www.ato.gov.au/businesses/content.asp?doc=/content/00095062.htm&mnu=42711&mfp=001/003

One with a user of labour and the labour hire firm. Payments under a Labour Hire Agreement Labour hire arrangements commonly involve at least two contracts One with a user of labour and the labour hire firm. Another with the Labour hire firm and the worker.

Labour Hire Agreement The labour hire firm contracts with the worker and pays the worker. There is no contract between the worker and the client.

Payments under Voluntary Agreements A Voluntary Agreement is a written agreement between a business and a worker to bring work payments into the PAYG withholding system. To be able to have a voluntary agreement the worker, as an individual, must: Have an Australian Business Number (ABN). Not be subject to any other PAYG withholding.

Effect of Voluntary agreements The business will withhold tax from payments it makes to the worker and send it to the ATO. The worker will not be required to pay PAYG instalments for that income.

Employment Termination Payments, Compensation and Leave Payments Under the PAYG withholding system, an employer may have to withhold amounts from these payments. Separate calculation tables are available to calculate amounts withheld. The tax tables take into account personal income tax rates including, Medicare Levy, HELP and other rebates. Where the payee does not give the payer a tax file number, tax must be withheld at the highest marginal rate plus Medicare Levy ( currently at 49% ).

Withholding Payment Dates Paid to ATO as Part of IAS/BAS Small withholders Annual withholding amount of up to $25,000. 28 October, 28 February, 28 April and 28 July. Slides prepared by Peter Miller National Core Accounting Publications

Withholding Payment Dates Medium withholders Annual withholding amount between $25,001 to $1 million – form is IAS payable on the 21st day of the following month except when BAS is lodged, then BAS dates apply Slides prepared by Peter Miller National Core Accounting Publications

Withholding Payment Dates Large withholders (withholding> $1,000,000 pa) An amount deducted in any period commencing Saturday and ending Tuesday is payable on the following Monday. An amount deducted in any period commencing Wednesday and ending Friday is payable on the following Thursday. Slides prepared by Peter Miller National Core Accounting Publications

Withholding Payments when an ABN is not Quoted You must withhold 46.5% tax if: You are a business making a payment for goods or services and the supplier of the goods or services has not quoted their ABN. You think the ABN quoted on an invoice may be false, or is not the real ABN of the supplier. The supplier has made a written, signed statement that the supply is private or domestic in nature, or relates to a hobby, but you have reasonable grounds to think the statement is false. Slides prepared by Peter Miller National Core Accounting Publications

Obligations of an Employer Sending TFN declarations to the ATO. Register for PAYG withholding. Notify and pay the amounts withheld. Giving an end of year PAYG payment summary to recipients by 14 July after the financial year. Reporting annually to the ATO on all your withholdings. By 14 August after the end of each financial year, a report must be provided to the ATO by the payer.

How much do we withhold from employees? You must withhold from: Salaries Wages Sick leave payments Annual leave payments and Most allowances

How much do we withhold from employees? PAYG bulletin no. 1 - taxing of allowances for the 2000/01 and future income years About this bulletin The pay as you go (PAYG) withholding system requires payers of allowances to withhold an amount from payments made to various payees. The information in this bulletin outlines the correct tax treatment of those allowances. This bulletin only applies to payers who pay allowances to payees who are employees, company directors or office holders. Failure to withhold amounts from allowances can cause concern to payees as well as to payers. From a payee's point of view, if an amount is not withheld from allowances paid during the year the payee may receive a tax bill at the end of the year. From the payer's point of view, a failure to withhold an amount or to disclose allowances paid on a payment summary may result in penalties being imposed on the payer. Last Modified: Tuesday, 14 August 2007 http://www.ato.gov.au/businesses/content.asp?doc=/content/18499.htm&pc=001/003/079/001/010&mnu=&mfp=&st=&cy=1

How much do we withhold from employees? Travel Allowances The pay as you go (PAYG) withholding system requires you as the payer of a travel allowance to withhold an amount from payments made to your various payees. PAYG withholding variations are approved provided: your employee is expected to incur expenses that may be able to be claimed as a tax deduction at least equal to the amount of the allowance the amount and nature of the allowance is shown separately in your accounting records. If the allowance is paid at the same rate or below the 'reasonable travel allowance' rate, and the allowance is separately accounted for in your records, no PAYG withholding is necessary. In addition, the travel allowance does not need to be shown on your payee's payment summary http://www.ato.gov.au/businesses/content.asp?doc=/content/70617.htm&pc=001/003/079/001/010&mnu=&mfp=&st=&cy=1

How much do we withhold from employees? Allowances Continued What is the correct tax treatment for allowances? Table 1 of this bulletin lists the various types of allowances that a payee might receive and states how these allowances must be treated by the payer. Table 2 of this bulletin lists those allowances for which the Commissioner of Taxation has approved a variation of the amount required to be withheld and their reporting on the payment summary. http://www.ato.gov.au/businesses/content.asp?doc=/content/18499.htm&page=3&H3

PAYG withholdings - Employees PAYG withholding calculator on ATO website PAYG tables – (we will use 14-15 tables) weekly, fortnightly, monthly TFN Declaration for each employee Amount to be used for the calculation including allowances etc.