As a result of the COVID-19 negative impact on small businesses, the Business NSW lobby group has been lobbying for payroll tax relief in the NSW annual state budget – stating that the relief in payroll tax will boost the economy and employment growth across the state.

Lobbying payroll tax has “paid” off. The New South Wales Treasurer, Dominic Perrottet has announced that the NSW payroll tax threshold will be increased to $1.2 million. Currently, the threshold sits at $1 million until 30 June 2021, and the current payroll tax rate is 5.45 percent. As Perrottet states “Our strong budget position has allowed us to weather the most severe economic storm in a generation, and we will continue to lead the way in job creation and supporting the business through the 2020–21 budget,”.

Earlier this month, NSW Premier Gladys Berekjiklian announced the government will allocate $250 million to support small and local businesses as a four-year program. The Jobs Plus program will provide payroll tax support to small businesses. This will include a four-year payroll tax-free period for businesses that create at least 30 new net jobs.  The Jobs Plus Program will commence on 15 December 2020 and conclude on 30 June 2022.

Business Council of Australia Chief Executive Jennifer Westacott is supporting the payroll tax relief announcement saying “Payroll tax is a tax on jobs, so payroll tax relief and removing investment-stifling red tape makes sense. We also welcome critical investment in programs to give workers in NSW access to the new skills they’ll need to get jobs in new industries”.     

What do I need to do for my payroll tax?

The payroll tax threshold differs in each Australian state and territory, and it is a tax paid to the state/territory. Your business payroll tax is determined by total monthly wages payable.

Your business may not need to pay payroll tax. Payroll tax is paid when your monthly wages are higher than the tax-free threshold. In NSW, employers who pay wages in NSW must be registered for payroll tax if their total Australian wages exceed the relevant monthly thresholds. You can find the payroll tax monthly thresholds >>here. These monthly thresholds will change from 1 July 2021 to account for the payroll tax threshold increase.

There are also exemptions from payroll tax that can benefit your business. Apprentices and trainees may be exempt from payroll tax – therefore their wages can be exempt from payroll tax. Additionally, motor vehicle allowances, accommodation allowances, and fringe benefits taxes are factors that determine if you are eligible for the full payroll tax threshold entitlement.

Furthermore, there is the issue of whether contractors are classified as “employees” or “external contractors”. Contractors and consultants’ salaries may be considered as wages for payroll tax purposes. Often employers make errors in classifying contractors versus employees resulting in the underpaid payroll tax. If caught out by the NSW Office of State Revenue, you need to have records that support your classification decisions. The NSW OSR has the right to penalize you if payroll tax is underpaid.

However, it is not as simple as filling in a form or incorrectly classifying employees in your payroll system to avoid paying payroll tax. All exemptions have requirements and/or thresholds that businesses must adhere to. If (or when) the OSR audit your business, they will look for documentation that supports all business expenses.

We recommend you have a chat with us at RT Accounting and Taxation Services. We care about all the payroll tax laws, exemptions, thresholds, and audits. It’s what we do best. We can ensure your business has all the right payroll tax documents in working order and all exemptions are correct. We want you to be ready if a payroll tax audit comes knocking on your door. Feel confident in our tax expertise and you focus on building your business.

If there was ever a time to be a law-abiding, business conscience employer – now is the time. Who would have thought a global pandemic would have prompted such a change in our working circumstances driving a closer examination into Australia’s workplace relations framework. While Covid-19 has transformed the home into a business office, employer representatives, experts, and unions have worked together to explore solutions for wage compliance and enforcement. The active union movement and class action interest have led the Fair Work Ombudsman (FWO) to focus on the issue and ensure businesses are aware of the consequences. Not to mention the Victorian and Queensland governments have passed legislation making wage theft a criminal offense with potential imprisonment as a penalty.

Wage theft sounds deliberate – and while it is the unlawful underpayment of employees – it describes all cases of employee underpayment, whether deliberate or unintentional. In all the years we have been working as tax accountants, we have seen very few underpayment cases. However, they do occur – even when you believe you have a plan in place. Often, underpayment cases in small businesses have occurred when employers have not understood and applied the correct aware requirements, resulting in wage non-compliance. This is a classic case of non-deliberate wage theft.

In Australia, there is a complex award framework, with over 120 modern awards – each award outlining minimum award wage rate and employment standards and conditions for employees based on their industry or occupation. The Fair Work Ombudsman keeps business owners on their toes by regularly reviewing and updating rewards. In fact, the framework is so complex – that we would recommend a professional with specialist knowledge to help you navigate it. This year, as a result of Covid-19, the Job Keeper wage subsidy (a vital lifeline for businesses trying to stay afloat) has compounded additional complexity. And with the introduction of Job Keeper 2.0, there’s no wondering why small businesses are left scratching their heads in confusion. Job Keeper 2.0 introduced changes to rates and eligibility, and employers were asked to apply a two-tier wage subsidy to its workforce. See what I mean when I say – best to hire a financial professional, who is equipped with the knowledge on how to navigate the system.

While there is no single mistake that addresses wage non-compliance, here’s how you can avoid wage theft and work with confidence >>

1. Find help

It is important that the Fair Work Act is completely understood by employers and business owners. Unfortunately, as a business owner, you may not have the time or the knowledge to apprehend all the requirements set out in the Fair Work Act. Therefore, it is worthwhile to have an accountant and HR representative to assist you in navigating its complexity. Additionally, external help can also run an audit on your business to identify any issues you have within your business. 

2. Custom your payroll system

When utilizing a payroll system, businesses must not forget to ensure it is up-to-date with all the correct awards and classifications. Unfortunately, out-of-the-box payroll software is not adequate for Australia’s complex award system; therefore it requires customization and maintenance. A professional can also assist with the management of your payroll system.

3. Understand award requirements and employee classifications

Keep up-to-date with relevant awards for your industry, and ensure you are correctly classifying employees. Misinterpretation of awards can result in an investigation by the Australian Taxation Office, and incorrect employee classification can bring Fair Work Ombudsman investigations. Both awards and classification issues can lead to the underpayment of your employees.

4. Made a mistake? Fix it ASAP!

While wage compliance is at the forefront of regulators, and unions – why not work with a professional to audit your business. If you find discrepancies within your employee classification or underpayments to employees, you will need to determine the length and amount of underpayment and rectify the mistake quickly. Additionally, finding the cause of the mistake will prevent underpayment from occurring again.

Navigating payroll, wage compliance, and the Fair Work Act in 2020 is more complicated than ever. Boost your confidence in your business’ compliance requirements, and come chat with us at RT Taxation accountant services for small businesses. We are equipped to help you keep on top of all the complexities surrounding wage compliance.

If you have any questions about the accuracy of your payroll systems in eastern suburbs and remuneration practices, now is the time to reach out to R T Accounting & Taxation Services for assistance.

COVID-19 has brought several challenges that have never been faced before by Australian Small Businesses. For many organizations, making small savings, day to day, could be the difference between continued operation and having to close. In these tough COVID times, we could be forgiven for expecting leniency. However, Victoria and Queensland have now passed legislation. This not only makes it an offense to underpay employees, as has always been the case. But they have introduced the additional penalty of potential imprisonment for business owners and operators.

In our decade of experience in the industry, deliberate underpayment of wages is rare. However, as seen in the media, underpayments do occur. Sometimes, it is the complexity of the Award system which leads to issues, in other cases, it is a misunderstanding of employer obligations and occasionally it is simply a calculation error. These instances should be rectified and dealt with accordingly once identified.

However, this genuine error has been labeled as “wage theft”, and in most cases, employers are vilified when they have identified the error themselves and have commenced a process of rectification. Despite this, State Governments such as Victoria and Queensland have introduced legislation to make underpayment of wages, in some cases, a criminal offense. We have not seen whether a genuine error will avoid being captured. The question now becomes. Will we be able to convince regulators that any error was genuinely inadvertent?

The introduction of the JobKeeper wage subsidy, which has become a vital lifeline for businesses trying to stay afloat, has added to the already complex wage environment in which a large amount of businesses operates. This has only gotten more complex with the introduction of JobKeeper 2.0, where rates and eligibility criteria have changed, and employers are asked to apply a two-tier wage subsidy to its workforce.

Now is not the time for employers to take their eye off the ball regarding wage compliance. You should not think it is alright to bend the rules to save much-needed dollars. We have been surprised in recent times, the increase in clients seeking payroll audits/reviews. Given the risks of getting it incorrect continue to increase, it makes more sense for your business to provide peace of mind that your payroll processes are correct and efficient.

RT Taxation accountant services for small businesses in the eastern suburb are well equipped to undertake these reviews to ensure that your Payroll is always correct, and no short cuts have been taken. These reviews can also identify, where employers, may be able to make savings in their payroll systems. If you have any questions about the accuracy of your payroll system and remuneration practices, now is the time to reach out to R T Accounting & Taxation Services for assistance.

A few high-profile Australian payroll services scandals have rocked the business world over the last year. George Calombaris underpaid workers $7.8 million. Lush Cosmetics discovered a significant payroll error, underpaying staff since 2010. Wesfarmers uncovered $24 million in payroll errors. And ABC (yes, the iconic Free to Air television broadcasting service) admitted to underpaying casual staff over the past six years! While the issues in each company may be different. All mistakes fall under the payroll umbrella of the business process. When it comes to payroll no business can afford to make mistakes.

Payroll blunders do not only occur in large businesses where staff numbers are high, and possibly more difficult to manage. Larger companies have dedicated teams and diverse payroll software to assist in flushing out all the payroll details (and yet some BIG mistakes are still made). Who takes care of payroll administration for small businesses?. As a business owner, focusing on building your business – doing what you love, will always remain your top priority. Losing sleep, trying to wrap your head around payroll tax legislation, remembering tax deadlines, and not forgetting superannuation contributions is not what building a business should look like. Don’t let payroll make your role as a business owner taxing!

In Australia, more businesses are relying on payroll software. For paying employees and manage the entire payroll process/function. Self-managing a payroll system can keep costs down. However, the complexity of software varies in the industry. It is often limited to the number of employees within a business. In addition, there are special factors that need to be accounted for. These are often overlooked by a business owner who does not have the time or knowledge to be abreast of all payroll laws and considerations.

In addition, Australian businesses need to ensure the payroll software is considering various employee requirements. Some of these include Child Support, Flexi-Pay, Salary Sacrifice, PPL, and more. This is why it’s important for businesses to recognize the complexities involved in the payroll process. Just to ensure they pay staff accordingly.

Payroll Mistakes

So, what kind of mistakes do businesses (large or small – this applies to all companies) make when it comes to payroll.

   1. Mis-handling data

Collecting the correct data, and ensuring data entry is precise is very important for an efficient payroll process. When collating information about employees, businesses are required to correctly classify employees to withhold the right amount of taxes. Payroll data includes employee tax file numbers, personal details, and payment information.

A simple way to minimize data entry blunders is to allow new hires to collate their own personal information into their payroll profile. Which involve them in the proofing process where employees can cross-check their profile. To ensure all details are correct.

   2. Not adhering to payroll deadlines

Believe it or not, employees are often faced with reminding their employer to correctly pay their benefits. Also superannuation and salary correctly and on time. According to a 2019 HRM “, 23% of organizations with 1-10 employees admit to making late payments to staff”. And “22% of these ‘micro-businesses’ admit to making late superannuation payments”.

Deadlines do not end with employee payroll. You can’t forget your monthly payroll tax liability lodged quarterly. Late payments may cause a penalty. So it’s important to follow regulations and complete payments on time!

And to make matters more complicated, the Australian Tax Office introduced the Job Keeper payments. Which has to change rates and wage condition amounts businesses need to adhere to. With so many deadlines and commitments that are tied to payroll. Any wonder why business owners find it taxing to manage it themselves!

   3. Forgetting the important bits

Just like data entry, the payroll process needs good attention to detail. There are so many different aspects of the entire process that can be overlooked quite easily. For example, Misclassifying employees. This simple mistake will lead to the incorrect application of award with overtime. Incorrectly understanding the award rate with overtime is a common mistake made by small businesses.

Don’t forget the superannuation contributions. Did you know that you can accidentally overpay an employee’s superannuation if they do overtime?. When it comes to superannuation contributions Small business directors are not always aware of the specifics.

And there is so much more to payroll than just employee taxable wages and superannuation contributions. Businesses need to specify contractor, apprentice, and trainee payments, document employee fringe benefits. And also employee allowances, include the director’s remuneration and manage employee sick leave. Fair Work states that a single employee is entitled to 10 days of sick leave per year calculated. As 1/26 of an employee’s ordinary hours of work in a year (I’ll leave that to your accountant to go over the finer details).

And lastly – what many would say, most importantly – the Fair Work Information Statement (FWIS). I’ll start with saying, you could receive a fine of up to $62,000. If you fail to provide your employees with a Fair Work Information Statement. 

Overlooking reporting

Payroll audit is unpleasant for any business, regardless if you’re running a large multinational organization or a small 20 employee company. In the case that your business is to be audited, you’re accurately kept business and payroll records will allow you to breeze through the audit with flying colors. This is a testament to why it is important to report every month and reconcile any issues. There may be some sort of human error. But going over your payroll records (and not forgetting to include all those important bits in point 3) will allow your business to continually improve accuracy. Always better to show you have self-corrected any mistakes along the way rather than being caught out trying to hide them further down the track.

Ever-changing Tax Law

Yes, the Tax Laws change frequently, and business owners need to keep up with variations made. It can be difficult for those small business owners who are focusing on actually building their business. To stay on top of law changes dictated by the Australian Taxation Office.

There you have it… There is so much to learn when it comes to payroll services in eastern suburbs. Staying on top of every little detail and law is tough. But it’s critical for your business to do so, to run smoothly and avoid payroll mistakes. The best way to take the “taxing” feeling out of payroll is to get in contact with our Accountants at R T Taxation & Accounting Services. You can take advantage of our Outsourced CFO Services to leave the administrative hassle of running your small business to the experts and for you to do what you know best.