PAYG

It is the responsibility of the business to calculate the correct amount of tax that should be deducted from wages. If the incorrect amount tax is deducted, your employee could get very angry if they have to pay tax when they lodge their income tax return due to your mistake.

The TFN declaration form provides a lot of information regarding how an employee should be taxed. The main fields on this form that relate to this include:

  • Are you an Australian resident for tax purposes?
  • Do you want to claim the tax free threshold from this payer?
  • Do you have a Higher Education Loan (HELP), Student Start-up Loan (SSL)?

Bizgro can help with the setup of your employee to ensure they are taxed correctly. Bizgro can lodge the correct amount of tax on either your BAS or IAS and ensure this reconciles with the payment summary when generated at the end of financial year.

Also, there are many rules regarding how different payroll items are taxed. The 2 main areas where businesses do not tax their employees correctly are:

  • Allowances
  • Termination Payments

Allowances

In most cases, if an employee receives an allowance for an expense incurred due to their employment or for 'extra' requirements (eg danger allowance, safety officer allowance), then tax needs to be deducted from their wage. However, if the allowance is a cents per kilometre allowance (up to 5000 kms), then no tax is deducted. There are many other rules regarding this, however, these are the 2 most common areas that our clients come across.

Termination Payments

Depending on the type of termination payment, will determine how much tax is deducted. In some instances, the amount of tax to be deducted is based on an employee's age or the reason why they were terminated. The staff at Bizgro are trained to handled these tricky situations.