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How to pay tax for employees

Small business guide to paying taxes for employees

When it comes to paying taxes for your employees, it’s essential that you understand your responsibilities as an employer. 

Paying and reporting employee taxes accurately also improves morale of your staff who have more confidence in your business’ processes.

How do I pay income tax for employees?

To report PAYG income taxes for your employees in Australia, you’ll need to register for a Tax File Number (TFN) and an Australian Business Number (ABN). You can apply for an ABN online via the Australian Business Register. 

You’ll also need to determine your employees’ tax rates based on their income, residency status, and any deductions that they may be entitled to.  Use reliable single touch payroll (STP) compliant software like Payroller for automated calculations of PAYG income taxes for your employees.

What is pay as you go withholding (PAYG)?

Pay as you go withholding (PAYG) is a system that allows employers to withhold income tax from their employees’ pay as they earn it. The amount of tax to be withheld is determined by the employee’s earnings and tax rate. 

How to withhold taxes for employees

Payroller software automates calculating PAYG.  You can be confident that the correct amount of tax is withheld from your employees’ pay and remitted to the Australian Tax Office (ATO) in real-time.

What are an employer’s income tax reporting responsibilities regarding employees? 

Employers are responsible for withholding and remitting income taxes for your staff to the ATO.  You may also need to lodge a Business Activity Statement (BAS) every quarter if applicable to your business. Consult the ATO website and seek advice from an accounting specialist if required. 

What’s the difference between PAYG income taxes and payroll taxes?

Unlike PAYG income tax, payroll tax is a state-based tax that employers must pay on their payroll expenses. Payroll tax rates and thresholds vary between states and territories. Generally, payroll taxes apply to larger businesses with more employees.  It’s important to check with your local revenue office to ensure that you’re meeting payroll tax obligations.

How to pay tax for employees with Payroller

Paying tax for your employees in Australia can seem complicated. However, Payroller software automates your PAYG withholding calculations and reporting tasks.  It’s easy to comply with ATO obligations. Follow our steps below to report PAYG and comply with single touch payroll (STP) requirements with Payroller. 

Step 1: Register for Payroller & set up your cloud payroll

Sign up to Payroller in a few minutes to set up your first payroll. You’ll need to enter your business information, such as your ABN and bank account details.  You can also register your Payroller account with the Australian Tax Office (ATO) so that you can enable and submit STP for your pay runs. 

Step 2: Enter your employees’ pay details

Once you’ve set up your payroll, you’ll need to add employees to your account.  Enter your employees’ pay details including hourly wage rates or salaries, as well as any allowances or deductions they may be entitled to. 

Step 3: Process your payroll & pay your employees

Once you’ve added individual employee information, you can make a pay run with a few steps. Payroller automates calculations of the correct tax amounts to be withheld from your employees’ pay as well as superannuation contributions.  

You can also download an ABA file to pay wages to your employees and make superannuation payments via our integration with BEAM super clearing house

Step 4: Report STP to the ATO with one click

As a single touch payroll (STP) compliant payroll solution, Payroller sends all PAYG information to the Australian Tax Office (ATO) in real-time on your behalf.  All it takes is one click to submit STP to the ATO from your completed pay run. 

With Payroller, you can streamline the payroll process, save time, and meet your employer PAYG reporting obligations in Australia.  Learn more about why Payroller is the best payroll and employee management system for any small business in Australia. 

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