Access Accurate Business Financial Information

Tel: 1300 136 227

Payroll & Employees

employee superannuation
Mar 18

Contractor vs Employee – Key Differences and How to Choose for Your Business

When hiring for your business, one of the critical decisions is determining whether to classify a worker as a contractor or an employee. The distinction impacts payroll, taxation, and legal obligations, so it’s vital to understand the differences and choose the right option for your business needs.

What is a Contractor?

A contractor is a self-employed individual or business entity hired to perform specific tasks or projects under a contract. Contractors typically provide their own tools, set their own hours, and invoice the hiring company for services rendered. They are responsible for managing their own taxes and insurance.

What is an Employee?

An employee works directly under the control and direction of the employer. They receive regular wages, have set working hours, and are entitled to employee benefits like leave and superannuation. The employer is responsible for withholding taxes and paying superannuation contributions.

Key Differences Between Contractors and Employees

The primary differences between contractors and employees include:

  • Control: Employers control how, when, and where employees work. Contractors operate independently and decide how to complete their tasks.
  • Payment: Employees receive regular wages, while contractors invoice for completed work.
  • Tax Obligations: Employers withhold taxes for employees, but contractors manage their own tax obligations.
  • Superannuation: Employers must pay superannuation for employees. Contractors may need to arrange their own super contributions.
  • Tools and Equipment: Contractors supply their own tools and equipment, while employees use company-provided resources.

Pros and Cons of Hiring a Contractor

  • Pros: Flexibility, no obligation to pay leave, access to specialised skills.
  • Cons: Potentially higher hourly rates, less control over work methods, and risk of misclassification penalties.

Pros and Cons of Hiring an Employee

  • Pros: Greater control over work processes, long-term loyalty, compliance with workplace laws.
  • Cons: Ongoing obligations for wages, leave, and superannuation, less flexibility in terminating employment.

Legal Implications of Misclassification

Incorrectly classifying a worker as a contractor instead of an employee can lead to serious legal and financial consequences. Employers may be liable for unpaid superannuation, payroll tax, and workers’ compensation. The Australian Tax Office (ATO) closely monitors worker classifications to prevent sham contracting arrangements.

How to Determine the Right Option for Your Business

When deciding between hiring a contractor or an employee, consider the nature of the work, duration of the engagement, and the level of control over the work process. If you’re uncertain, consult a qualified bookkeeper or accountant to ensure compliance with tax and legal requirements.

Need Help With Worker Classification?

At Northern Beaches Bookkeeping Solutions, we assist businesses in navigating the complexities of worker classification. Whether you need help managing contractor invoices or ensuring employee payroll compliance, our team is here to provide expert guidance and support. Contact us today to learn more.

Payroll & Employees by Coralie Downie
Fixed Price Bookkeeping Services
Feb 9

Fair Work Pay Calculator – Accurate Wage Calculations for Small Businesses

Ensuring your employees are paid correctly is not only a legal obligation but also vital to maintaining staff morale and avoiding disputes. The Fair Work Pay Calculator is a valuable tool for small businesses, helping employers accurately calculate wages, overtime, and entitlements according to Australian regulations.

What is the Fair Work Pay Calculator?

It is a free, online tool provided by the Ombudsman. It allows employers to calculate pay rates, overtime, and allowances based on job type, industry, hours worked, and other employment conditions. This ensures that employees receive fair and compliant wages.

Why Accurate Wage Calculation Matters

Incorrect wage calculations can lead to underpayments, legal disputes, and penalties. By using the calculator, businesses can ensure they comply with national wage standards and pay employees accurately for their work, including overtime and penalty rates.

How to Use the Fair Work Pay Calculator

  • Visit the Fair Work Pay Calculator.
  • Select the job type (full-time, part-time, casual).
  • Enter the employee’s job classification and award rate.
  • Input hours worked, including overtime and penalty rates.
  • Calculate the total pay, including any allowances or deductions.

What the Fair Work Pay Calculator Covers

The calculator helps you determine:

  • Base Pay Rates: Standard hourly wages based on award rates.
  • Overtime Pay: Additional pay for hours worked beyond standard hours.
  • Penalty Rates: Higher pay rates for weekends, public holidays, and late-night shifts.
  • Allowances: Additional payments for specific tasks or expenses.
  • Leave Entitlements: Paid leave entitlements, including annual leave and sick leave.

Common Mistakes to Avoid

When using the the calcultor, avoid these common errors:

  • Not selecting the correct job classification or award rate.
  • Failing to include overtime hours or penalty rates.
  • Miscalculating allowances or additional payments.
  • Ignoring industry-specific requirements or agreements.

Need Help With Wage Calculations?

If you’re unsure about how to accurately calculate wages or comply with Fair Work regulations, Northern Beaches Bookkeeping Solutions can assist. Our experienced bookkeepers can review your payroll processes, identify potential errors, and ensure compliance with current wage laws. Contact us today to learn more.

Payroll & Employees by Coralie Downie
May 25

STP (Single Touch Payroll) – A Guide for Small Businesses

Single Touch Payroll (STP) is a mandatory payroll reporting system introduced by the Australian Taxation Office (ATO) to streamline payroll processes and ensure compliance with tax and superannuation obligations. Here’s what small businesses need to know about STP, how it works, and how to stay compliant.

What Is Single Touch Payroll (STP)?

STP is a payroll reporting method that requires employers to report employee payments, including wages, PAYG withholding, and superannuation, to the ATO each time they process payroll. The information is submitted electronically, ensuring accurate and up-to-date reporting for every pay cycle.

How Does STP Work?

STP reporting is integrated into payroll software, making it easier for businesses to comply with ATO requirements. Each time you run payroll, the following information is automatically reported to the ATO:

  • Employee salaries and wages
  • PAYG withholding amounts
  • Superannuation contributions

The ATO uses this data to keep track of employee income, tax liabilities, and super contributions in real time, reducing the need for separate year-end reports like the Payment Summary Annual Report (PSAR).

STP Phase 2 – What’s New?

STP Phase 2 introduces additional reporting requirements to provide more detailed information about employee income and tax obligations. Key changes include:

  • Reporting income by income type (e.g., salary, allowances, bonuses)
  • Identifying tax treatment codes for each employee
  • Disaggregating gross payments to provide more transparency
  • Reporting child support deductions and garnishees

Businesses must ensure their payroll software is updated to meet STP Phase 2 requirements and avoid potential ATO penalties for non-compliance.

Benefits of Single Touch Payroll (STP)

Implementing STP offers several benefits for small businesses, including:

  • Compliance: Ensure accurate and timely reporting to the ATO, reducing the risk of fines and penalties.
  • Efficiency: Streamline payroll processes and eliminate the need for year-end PAYG summaries.
  • Transparency: Provide employees with real-time access to income and tax data through MyGov.
  • Record-Keeping: Maintain accurate and up-to-date payroll records for audit purposes.

How to Set Up STP for Your Business

To comply with STP requirements, small businesses need to:

  • 1. Choose STP-Enabled Payroll Software: Ensure your payroll software is STP-compliant. Popular options include Xero, MYOB, and QuickBooks.
  • 2. Register for STP Reporting: Register your business with the ATO to commence STP reporting.
  • 3. Set Up Employee Records: Collect accurate employee information, including TFNs, pay rates, and superannuation details.
  • 4. Configure Payroll Software: Set up payroll categories, pay schedules, and tax codes in the software.
  • 5. Conduct a Test Run: Run a test payroll to ensure data is reported correctly to the ATO.

Common STP Reporting Mistakes to Avoid

  • Incorrect employee details, such as TFNs or pay rates
  • Failing to report superannuation contributions
  • Not reporting all pay cycles, including bonuses and overtime
  • Late or missed STP reports, resulting in ATO penalties

What Happens If You Miss an STP Report?

Missing an STP report can result in fines and penalties from the ATO. If you miss a report, notify the ATO immediately to avoid further consequences. Regularly reviewing payroll records and ensuring data accuracy can help prevent missed reports.

Need Help with STP Reporting?

Setting up and maintaining STP can be complex, especially with the new Phase 2 requirements. At Northern Beaches Bookkeeping Solutions, we provide expert support to ensure your payroll is compliant and accurately reported to the ATO. Contact us today to learn more.

Payroll & Employees, Single Touch Payroll by Coralie Downie
Fixed Price Bookkeeping Services
Feb 16

Behind With Your Super Payments? How to Catch Up and Avoid ATO Penalties

Falling behind on superannuation payments can have serious consequences for small businesses, including financial penalties and damaged employee trust. If you’re behind on super payments, it’s important to take immediate action to catch up and stay compliant with ATO regulations. Here’s a step-by-step guide to getting back on track.

What Happens If You’re Behind on Super Payments?

If superannuation payments are not paid by the quarterly due date, the ATO may impose a Superannuation Guarantee Charge (SGC). This charge includes:

  • Unpaid Super Amount: The amount of super that should have been paid to employees.
  • Interest on Unpaid Super: Currently set at 10% per annum, calculated from the due date.
  • Administration Fee: $20 per employee per quarter for missed payments.

Steps to Catch Up on Unpaid Superannuation

To resolve unpaid superannuation and minimise penalties, follow these steps:

  • 1. Calculate Unpaid Super: Review payroll records to identify missed super payments and calculate the total amount owed.
  • 2. Lodge an SGC Statement: Complete a Superannuation Guarantee Charge (SGC) statement to report unpaid super to the ATO.
  • 3. Pay the SGC: Pay the SGC directly to the ATO, including unpaid super, interest, and administration fees.
  • 4. Update Payroll Records: Adjust payroll records to reflect paid super and ensure future contributions are calculated correctly.
  • 5. Implement a Payment Plan: If you can’t pay the full SGC amount upfront, contact the ATO to discuss a payment plan.

How to Avoid Falling Behind on Super Payments

Preventing future superannuation issues requires a proactive approach to payroll and financial management. Consider the following strategies:

  • Automate Super Payments: Use payroll software to calculate and pay super automatically each pay cycle.
  • Set Payment Reminders: Schedule reminders for quarterly super due dates to avoid missing payments.
  • Reconcile Payroll Regularly: Review payroll reports to verify that super amounts are accurately calculated and paid.
  • Hire a Bookkeeper: A qualified bookkeeper can monitor super obligations, lodge SGC statements, and ensure compliance.

Superannuation Due Dates to Remember

Superannuation payments are due quarterly. Mark these key dates in your calendar:

  • 1st Quarter (July – September): Due by 28 October
  • 2nd Quarter (October – December): Due by 28 January
  • 3rd Quarter (January – March): Due by 28 April
  • 4th Quarter (April – June): Due by 28 July

Penalties for Late Super Payments

The ATO takes unpaid super seriously. If you fail to pay super on time, you may face the following penalties:

  • Superannuation Guarantee Charge (SGC): Includes the unpaid super, interest, and admin fee.
  • Failure to Lodge Penalty: Additional fines for not lodging an SGC statement on time.
  • Director Penalty Notices: Company directors may be held personally liable for unpaid super.

Need Help Catching Up on Unpaid Super?

If you’re behind on super payments and unsure how to resolve the issue, Northern Beaches Bookkeeping Solutions can help. Our experienced bookkeepers can review your payroll records, calculate unpaid super, and assist with lodging SGC statements to the ATO. Contact us today to get back on track and avoid further penalties.

Payroll & Employees, Superannuation by Coralie Downie
Feb 16

Single Touch Payroll (STP) – A Complete Guide for Small Businesses

Single Touch Payroll (STP) is a payroll reporting system that requires employers to report employee wages, tax withheld, and superannuation contributions to the Australian Taxation Office (ATO) every time payroll is processed. For small businesses, STP simplifies payroll reporting, reduces paperwork, and helps ensure compliance with ATO regulations.

What Is Single Touch Payroll (STP)?

Introduced by the ATO, Single Touch Payroll (STP) is a mandatory payroll reporting system that requires employers to report payroll information directly to the ATO at each pay run. STP covers:

  • Employee wages and salaries
  • PAYG withholding amounts
  • Superannuation contributions

Instead of submitting separate reports at the end of the financial year, STP reports are lodged electronically through STP-enabled payroll software, providing the ATO with real-time payroll data.

Benefits of Single Touch Payroll for Small Businesses

Implementing STP offers several advantages for small businesses, including:

  • Streamlined Reporting: Reduces paperwork and manual data entry, as payroll information is reported automatically each pay cycle.
  • Improved Compliance: Ensures accurate and up-to-date payroll data is submitted to the ATO.
  • Employee Transparency: Employees can access their year-to-date income, tax, and super information through MyGov.
  • Reduced Risk of Penalties: Timely reporting reduces the risk of ATO penalties for late or inaccurate payroll reporting.

How to Set Up Single Touch Payroll (STP)

To implement STP for your small business, follow these steps:

  • 1. Choose STP-Enabled Payroll Software: Select payroll software that is ATO-compliant and supports STP reporting, such as Xero, MYOB, or QuickBooks.
  • 2. Register for STP Reporting: Notify the ATO that you will be using STP by updating your payroll software settings.
  • 3. Collect Employee Information: Ensure that employee records include accurate information, such as Tax File Numbers (TFNs), superannuation details, and pay rates.
  • 4. Configure Payroll Settings: Set up payroll categories, pay cycles, and tax codes in the software.
  • 5. Conduct a Test Run: Run a test payroll to confirm that data is reported accurately to the ATO.

Understanding STP Phase 2 – What’s New?

STP Phase 2 introduces additional reporting requirements, including:

  • Reporting income by income type (e.g., salary, allowances, bonuses)
  • Separating tax treatment codes for different income streams
  • Including child support deductions and garnishees

Businesses must ensure their payroll software is updated to meet STP Phase 2 requirements to avoid non-compliance penalties.

STP Reporting Deadlines

STP reports must be lodged each pay cycle, typically on the same day payroll is processed. The ATO provides some flexibility for small businesses, allowing them to lodge reports within 24-48 hours of processing payroll. End-of-year finalisation must be completed by 14 July.

Common STP Mistakes to Avoid

  • Failing to report superannuation contributions
  • Incorrect employee details (e.g., TFNs or pay rates)
  • Not marking the STP report as “Final” at the end of the financial year
  • Reporting incorrect pay dates or pay cycles

What If You Miss an STP Report?

If you miss an STP report, notify the ATO immediately to avoid penalties. Correct the missed report by lodging an amended STP report, ensuring that all payroll data is accurate and complete.

Need Help With STP Reporting?

Implementing and maintaining STP can be challenging, especially with new Phase 2 requirements. At Northern Beaches Bookkeeping Solutions, we provide expert payroll support to ensure your business remains compliant. Contact us today to learn more about our payroll and STP reporting services.

Payroll & Employees, Single Touch Payroll by Coralie Downie
Call Now Button