How to Manage Payroll Taxes: 5 Essential Tips

Employers across Australia’s many states and territories may have to pay payroll taxes depending on a range of factors. 

Payroll taxes in Australia were harmonised in 2007, which greatly simplifies payroll tax administration across various states and territories. Nevertheless, payroll tax remains an obligation that can be complex for businesses to lodge.

Below are five essential tips to manage your payroll taxes:

  • Understand Your Payroll Obligations

Unlike many other taxes in Australia, payroll taxes are not levied by the federal government but are instead subject to levy by individual states and territories. What this means is that every state and territory in Australia has different rates of payroll taxes as well as different regulations pertaining to payroll taxes. Employers must self-assess and lodge their payroll obligations themselves (or by means of an accountant).

Some of the most important obligations to note are your state/territory payroll tax rate, the minimum threshold amount, and any maximum annual deduction entitlements. Employers may often have different rates in regional areas of states/territories or metro areas, depending on the state/territory, which a reputable accounting firm can provide guidance on. 

  • Maintain Good Record Keeping

While this tip applies to essentially all taxation and is a general best practise, payroll taxes depend on proper record keeping. Keep records of all paid salaries/wages as well as any bonuses, commissions, or allowances in black and white as this will facilitate accounting and payroll.

  • Use Payroll Software and Online Resources

To streamline payroll and accounting, businesses should invest in the appropriate resources such as taxation and payroll software or outsource this task to a qualified professional (which can free up a lot of resources and avoid errors/omissions).

There’s a lot of i’s to dot and t’s to cross when it comes to lodging taxes in general, and businesses with employees that must lodge payroll taxes have even more to look after. Unfortunately, there are no true shortcuts to avoiding this. 

Classify Your Employees

Just like keeping tabs on all wages, salaries, and payroll taxes, it is essential to classify your employees correctly to avoid overpaying or underpaying payroll taxes. Depending on the nature of your business, you may have a handful of part-time employees, a full-time manager, or various other types of contractual engagements with your employees in place such as casual employees.

If you manage a large team of employees across perhaps multiple branches, this task can be complex and time-consuming and it may be wise to consider hiring an accounting firm to properly classify your employees and payroll obligations.

  • Choose a Reputable Accounting & Payroll Firm

As with many tax obligations, business owners and managers often have a lot on their plates and little time to fuss about the minutiae of tax regulations (but hopefully not their obligations!). Hiring a reputable accounting firm not only helps to maintain compliance with tax obligations but also to maximise deductions and tax burdens whilst freeing up precious resources for businesses to do what they do best – create value for customers.

Badawy Large & Powers

Contact Badawy Large & Powers for payroll and accounting services.