As a business owner, hiring and paying workers correctly is essential for compliance, financial stability, and employee satisfaction. Understanding your obligations regarding payroll, taxation, and superannuation ensures your business operates smoothly while avoiding costly penalties.
This guide covers the key aspects of hiring and paying workers, ensuring you meet Australian Taxation Office (ATO) requirements while keeping your workforce engaged and paid correctly.
Who Needs to Register for PAYG Withholding When Hiring and Paying Workers?
If you hire employees, contractors, or other workers and pay them for their services, you may be required to register for Pay As You Go (PAYG) withholding. This applies when:
- Employing staff under a contract or award agreement.
- Paying workers above the tax-free threshold.
- Engaging contractors and have voluntary agreements in place.
How to Register:
- Register for PAYG withholding through the ATO’s Online Services for Business.
- Alternatively, your registered tax or BAS agent can assist with registration.
Understanding Superannuation Obligations When Hiring and Paying Workers
Superannuation (super) is a key component of employment in Australia. As an employer, you must contribute at least 11% of an employee’s ordinary earnings into their nominated super fund.
Key Superannuation Requirements:
- Contributions must be made at least quarterly.
- You must offer employees a choice of superannuation fund.
- Super payments should be made via SuperStream, ensuring compliance with ATO regulations.
Failure to meet super obligations may result in penalties, so timely contributions are crucial.
How to Pay Employees Correctly When Hiring and Paying Workers
Paying your employees correctly means following fair work laws, tax requirements, and ensuring wages meet industry standards.
Steps to Ensure Proper Payments:
- Determine Employee Status: Confirm whether your worker is an employee or contractor.
- Check Award Rates: Ensure wages align with industry awards or agreements.
- Withhold PAYG Tax: Deduct tax from employee wages and report it to the ATO.
- Issue Pay Slips: Provide detailed payslips showing deductions, super contributions, and gross/net pay.
- Report Through Single Touch Payroll (STP): Ensure all wages and tax information are reported electronically to the ATO.
Single Touch Payroll (STP) Reporting for Hiring and Paying Workers
STP is a mandatory requirement for businesses paying employees. It streamlines payroll reporting by directly sending employee payment details to the ATO.
Benefits of STP:
- Reduces paperwork and ensures compliance.
- Provides real-time updates to employees through myGov.
- Ensures accurate reporting of wages, tax, and super.
Employers should use ATO-compliant payroll software to meet STP requirements.
Common Mistakes to Avoid
- Incorrect Worker Classification – Misclassifying employees as contractors can lead to legal and tax issues.
- Failing to Pay Super on Time – Late or missing contributions may result in super guarantee charges.
- Underpaying Employees – Ensure compliance with the Fair Work Commission’s minimum wage standards.
- Not Using STP Reporting – Manual payroll reporting is outdated and non-compliant.
- Missing PAYG Withholding Payments – Failing to withhold and report tax can lead to ATO penalties.
How Cotchy Can Help
At Cotchy, we specialise in payroll, BAS lodgements, and tax compliance, ensuring your business meets all ATO requirements. We offer:
- Accurate Payroll Processing – Helping you manage wages, deductions, and STP reporting.
- Superannuation Compliance – Ensuring timely contributions and ATO-approved reporting.
- Tax and BAS Services – Handling PAYG withholding, BAS lodgements, and end-of-year tax reporting.
- ATO Liaison – We’ll communicate with the ATO on your behalf, so you can focus on running your business.
Final Thoughts
Hiring and paying workers is an exciting step for business growth and that’s why ensuring payroll compliance is critical. By understanding your obligations regarding PAYG withholding, superannuation, and STP reporting, you can avoid compliance issues and keep your team satisfied.
Need Help with Compliance?
Contact the team at Cotchy today to ensure your hiring and payroll processes meet ATO requirements. Our expert accountants are here to simplify tax compliance and financial management for your business.
Source: ATO