Payroll Accounting Chapter One The Payroll System Payroll

Payroll Accounting Chapter One The Payroll System Payroll Accounting 1

Wages and Salaries Q What are wages and salaries? A Business expenses for work performed by employees. Payroll Accounting 2

1. 1 Introduction to Payroll PAYG (Pay As You Go) Withholding Tax: The employer deducts tax from the pay of employees and remits the income tax to the Australian Taxation Office (ATO). Payroll Accounting 3

Employer Obligations ▪ ▪ • Pay correct wages. Maintain records. Register as a PAYG Withholder. Withhold PAYG Withholding Tax. Report and pay PAYG Withholdings on the BAS or IAS. ▪ Provide PAYG Payment Summaries ▪ Lodge a PAYG Withholding Annual Report ▪ Pay Superannuation Guarantee. Payroll Accounting 4

Internal Controls ( a ) Adequate supervision and authorisation of hours ( b ) Separation of duties ( c ) Review of register and journals Payroll Accounting 5

Accurate Payroll Accounting • Regular and precise payment of wages and salaries is an important aspect of human resource management. • Timely and reliable recording of payroll details is also needed to meet statutory and industrial award requirements. Payroll Accounting 6

Glossary of Terms The terms in the Glossary will be used in future chapters. As you come across each term, ask yourself: • • Are there any words or terms in the explanation which I don’t understand? How could I explain this concept to someone else, in different words? Which specific payroll function does this term relate to? Why is this term important? Why would I need to know it? Payroll Accounting 7

1. 2 Legislation and Regulatory Bodies The pay rates and working conditions of workers may be regulated by federal or state legislation, industry awards, agreements and employment contracts. Payroll Accounting 8

Fair Work Australia Range of functions relating to: • minimum wages and employment conditions • enterprise bargaining • industrial action • dispute resolution • termination of employment • other workplace matters. Payroll Accounting 9

Fair Work Ombudsman Manages and provides information and advice about workplace rights and rules. • offers people a single point of contact for them to get information • educates people working in Australia • investigates complaints or suspected contraventions • litigates to enforce workplace laws • builds strong and effective relationships with stakeholders. Payroll Accounting 10

The Australian Taxation Office Administers taxation legislation. It is the collection agency for most Commonwealth taxation revenue including personal income tax, company tax and GST. Payroll Accounting 11

Tax File Numbers (TFN) Used by the ATO to individually identify each taxpayer. Payroll Accounting 12

TFN Declarations An employer needs to obtain a TFN Declaration form from each of their employees. If the employee does not declare a TFN on the form, tax is withheld at 49%. Payroll Accounting 13

PAYG Withholding Tax • Tax deducted from wages. • Also known as PAYG Withheld. Paid by the employer on behalf of the employee to the ATO as an instalment of personal income tax of the employee. Payroll Accounting 14

PAYG Withholding Tax Business’ Obligations: • Register • Keep records • Collect TFN Declaration and Withholding Declaration Forms • Withhold the prescribed amounts • Report and remit to the ATO • Issue PAYG Payment Summaries. Payroll Accounting 15

Superannuation Guarantee Exemptions: • less than $450 per calendar month • under 18 working < 30 hours per week • < 30 hours domestic or private work for nonbusiness employer. Payroll Accounting 16

Superannuation Guarantee 9. 5% of the employee’s Ordinary Time Earnings (OTE) to a complying superannuation fund (CFS). Ordinary Time Earnings: • wages and salary paid • non-expendable allowances • casual loadings • over award payments • shift payments • leave and workers compensation payments. Payroll Accounting 17

Super Payment Due Dates Superannuation Quarter Payment due date 1 July - 30 September 28 October 1 October - 31 December 28 January 1 January - 31 March 28 April 1 April - 30 June 28 July Payroll Accounting 18

Fringe Benefits Tax on non-cash benefits to employees or employees’ associates. Common Examples: • Car Fringe Benefit • Expense Payment Fringe Benefit • Loan Fringe Benefit Payroll Accounting 19

Medicare Levy • 2% of taxable income • Levy is included in amounts listed in Tax Tables (see Appendix of your book) • Medicare levy surcharge or reduced Medicare levy may apply to specific employees. Payroll Accounting 20

Australian Business Number (ABN) • Unique 11 digit number identifying an Australian business. • Must be stated on Tax Invoices. • Allows participation in GST system. • Required to purchase a. au domain name. Payroll Accounting 21

Higher Education Loan Program (HELP) • A student’s contribution to the cost of a tertiary qualification. • Indexed loan from the government. Payroll Accounting 22

Other Payroll Legislation • • • Payroll Tax Privacy Act 1988 Australian Bureau of Statistics Act 1975 Workers Compensation Tax Agent Services Act 2009 Payroll Accounting 23

1. 3 Collecting Data • Awards, Individual contracts and Enterprise agreements. • Tax File Number Declaration. • Withholding Declaration. • Deductions notification. • Superannuation Standard Choice Form. Payroll Accounting 24

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Data to be Collected • How much should an employee be paid? • Is the employee claiming the tax-free threshold? Answers to these and other questions are found in various documents that the employer gathers Payroll Accounting 26

Awards and Agreements Industrial Awards These can be Federal or State. Federal Awards cover the whole country and State Awards cover individual States. Enterprise Agreements A contract resulting from negotiations between the business owners and groups of employees Payroll Accounting 27

Tax File Number Declaration All employees are required to complete a TFN Declaration when commencing work with an employer Payroll Accounting 28

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Withholding Declaration Used for: • amending details originally submitted on the TFN Declaration; or • for the employee to request additional tax to be deducted from his/her wages • Go to www. ato. gov. au and search ‘NAT 3093’ or ‘Withholding Declaration’. Payroll Accounting 30

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Deductions Notification Employers and employees may reach an agreement to deduct regular amounts for personal expenses from the employee’s pay. Examples of deductions: • medical insurance • housing loan repayments • union fees Payroll Accounting 33

Superannuation Standard Choice Form Employees can nominate a particular superannuation fund for their Superannuation Guarantee payments To do so they complete a Superannuation Standard Choice Form. Payroll Accounting 34

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Employee Record / Employee Card Payroll Accounting 36