payroll

5 payroll pitfalls to avoid over the Christmas break

Christmas cards festival bookkeeping

With only a week to go until Christmas many small business owners are desperately trying to keep everything together and make it through this busy time of year.  It’s not just running a business, it’s also end of school functions, sport functions, work functions, organising pets and holidays, organising food and getting the present shopping done.

If you have employees then you can also throw payroll issues into the mix as well.  The Christmas period brings with it a few extra challenges to face as an employer, so I’ve prepared these 5 tips to help you through so you’ve still got some wind left in your sails to enjoy the silly season. These tips apply to Australian readers, but will give other readers some ideas as to what they need to look out for as well.

1. Christmas bonuses and super

Bonuses are considered Ordinary Time Earnings (OTE) and must therefore be included in your calculation of the super guarantee for your employees. More info on bonuses here.

2. Asking employees to take Annual leave

This is really interesting and can be a bit of a touchy topic for employers and employees.  When I was an employed bookkeeper I was asked to use up some of my annual leave – not just over the Christmas break but when I had a bit accumulated during the year.  An employer can only direct an employee to use up their annual leave in some situations. There is often an amount of notice you must give your employees as well. You need to check the relevant Award or Registered Agreement to see under what circumstances you’re allowed to direct your staff to take annual leave.

2. Rest breaks

Many businesses are busy this time of year, however there is a maximum amount of hours you can make your employees work without a break. Check the Award or registered agreement that your employees come under. For example, the Clerks Private Sector Award 2010 stipulates (at the time of writing) that employees who work for 5 hours or more must get at least 1 meal break.  More info on Awards and break entitlements here.

4. Casual vs part-time vs fixed term

There are differences between casual employees, part-time employees and fixed term employees – and yes, the onus is on the employer to ensure they have categorised the employee correctly and have given them the appropriate entitlements. You may hire someone on a casual basis over the Christmas break but the actual working conditions may change over time and their entitlements should be reviewed accordingly.

5. Christmas parties

Ahhh … Christmas parties.  What to claim and what not to claim? There are rules around when you can claim a tax deduction, when you can claim GST credits and what you need to pay fringe benefits tax on.  First you need to determine if the food and drink you’re providing is considered “entertainment” in the eyes of the ATO.  You need to look at why the food and drink is being provided, what type, when it’s being provided and where (on or off business premises). You can find the ATO’s rules regarding providing entertainment and the associated taxes here. There are some helpful scenarios that walk you through the process of deciding what to claim.

Wishing everyone a great Christmas.

Happy bookkeeping…

Sarina

 

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Small business owners – Wages or Drawings?

working-at-table-with-laptop

The issue of paying yourself money from your business can be confusing.

Technically, a Sole Trader cannot employ themselves. Money a sole trader takes out of the business for personal use is classified as “drawings” and is not considered wages for tax purposes. Drawings are not allowable deductions for the business.

Transactions that you record using the account Drawings are not reported in Activity Statements that are lodged with the Australian Taxation Office.

This is also the case for someone who has their business set up as a Partnership. At law, you cannot be an employee.

If your business is set up as a Company, you can be an employee of the company.  You can pay yourself wages and would therefore withhold PAYG withholding tax if your wages are above the tax free threshold.  Unlike drawings, wages are allowable deductions for the business.

Transactions that you record using your “Wages” accounts are also not reported in the “Goods & Services Tax” section of your Activity Statements – only the “PAYG tax withheld” section.

Because Drawings and Wages are both outside of the GST system the tax codes to use in your accounting software are as follows:

Xero = BAS Excluded

MYOB = N-T

Reckon Accounts = leave the tax code blank

 

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Happy bookkeeping…

 

New Employee Checklist

Secretary black and white
A good checklist from the ATO website if you are small business owner thinking of hiring a new worker.

Takes you through all the things you need to establish upfront, for example “Is your new worker an employee or a contractor” (a hot topic with the ATO at the moment) and “What are your record-keeping requirements”.

 

Link to ATO website:  Hiring new staff

 

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Happy bookkeeping…

 

Payslips – 10 things that must be included

Payslips

I’ve noticed that whenever someone in a movie is being set up on a blind date, it is always with “such and such from payroll”…which is followed by an eye-roll and much protesting.  Are payroll people that bad? We do, after all, process your pays – shouldn’t you be nice to us?

But I digress, this post is about the 10 things that must be included on payslips in Australia.  And here they are:

  • Employer’s & employee’s name
  • Employer’s ABN if applicable
  • Pay period that is covered in that pay
  • Date of payment
  • Gross and net pay
  • Hourly rate employees – ordinary hourly rate, number of hours worked & total dollar amount of pay
  • Loadings, allowances, bonuses, incentive-based payments, penalty rates or other paid entitlements that can be separated out from an employee’s ordinary hourly rate
  • Pay rate that applied on the last day of employment
  • Deductions – amounts & details of each deduction plus the name or name & number of the fund/account deductions paid into
  • Superannuation contributions – amount of contributions made during pay period plus the name or name & number of the super fund the contributions were made to

Bonus tip: Payslips can be either be printed out or be an electronic copy, but make sure employees can access and print their payslip in private.

Personally I love payroll and it’s become a bit of a specialty area for me.  I was a legal secretary for many years and used to watch the bookkeeper handing out payslips each week and think to myself “I would much rather be doing that”.  And here I am now working in, writing about and teaching payroll.

Do you process pays in your workplace or in your own business? Do you love it or hate it?

If you’ve enjoyed this post or any of my other posts then it would be great to connect with you on Facebook: Festival Bookkeeping.  Look forward to hearing from you!

9 Rights You Have as an Employee

9 rights you have as an employee

There are certain procedures and conditions an employer must have in place for their employees in Australia.

Don’t be afraid to ask your employer for any of these things if they aren’t currently being provided – it may be the case that your employer didn’t know themselves.

  • Payslips – must be provided to you within 1 working day of being paid, even if you are on leave.
  • Holiday and personal leave balances – must be provided to you if you request it.
  • Superannuation – has to be paid into your nominated super fund at least every 3 months.
  • Deductions – if you are under 18 your employer cannot deduct money from your pay unless your parent/guardian has agreed in writing.
  • Jury duty – your employer must give you leave to attend jury selection and jury duty (called community service leave). This includes casual employees. You must give your employer reasonable notice of the leave and, if they ask for it, evidence of the need to attend the community service.
  • Payment Summaries – must be provided to you by 14th July, even if no tax was withheld from your pay.
  • Fair work information statement – must be provided to you before, or as soon as possible after, you begin employment.
  • Extra tax – if you want your employer to deduct extra PAYG withholding tax from your pay then you must both agree in writing.
  • Tax File Number declaration form – must be provided to you when you begin employment, and your employer must submit the completed form to ATO within 14 days of your start date.

These are just some of the rights you have as an employee, but there are a few more that are useful to know. These can be found on the Australian Government’s Fair Work website and the ATO website.

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Happy bookkeeping…

Are you a small business with employees?

small business

The ATO has recently made some changes that might affect you.

Have you hired a new employee recently?

You’ll need to complete a Tax File Number Declaration form and send it in to the ATO within 14 days of the employee’s start date. If you are manually completing the form and posting it to the ATO, don’t forget to keep a copy for your own records and write the date posted on it, as the latest version of this form doesn’t include a copy for employers to keep. From September this year you won’t be able to get these forms from newsagencies anymore – the ATO is very much moving away from paper-based forms and encouraging business to embrace their online services.

There are benefits to lodging forms online, so don’t be afraid to look into the ATO’s Business Portal or Standard Business Reporting (SBR).

Happy bookkeeping.