Hiring New Employees for the Festive Season? Here’s How to Stay Compliant with Tax and Super Obligations
As the festive season approaches, businesses often experience an increase in demand. To keep up, you may find yourself needing to hire new employees—whether part-time, casual, or temporary staff—to help manage the workload. While expanding your workforce can be exciting, it’s crucial to stay on top of your tax and super obligations to avoid penalties and ensure your business remains compliant.
In this article, we’ll walk you through everything you need to know about hiring new employees, including withholding the correct amount of tax, paying super guarantee (SG), and reporting through Single Touch Payroll (STP). Let’s make sure you’re ready to meet your obligations and avoid unnecessary stress this holiday season.
Withholding the Right Amount of Tax
One of the first things you need to do when hiring new staff is ensuring you’re withholding the correct amount of tax from their wages. This is a critical step because it helps your employees meet their end-of-year tax liabilities without facing unexpected bills from the Australian Tax Office (ATO). Here’s what you need to know:
Why It’s Important
As an employer, you’re required by law to withhold tax on behalf of your employees. This means you deduct a portion of their wages to pay towards their income tax. If you withhold too little, they may owe money at the end of the financial year. Withhold too much, and your employees could face cash flow issues.
How to Get It Right
The ATO provides several tools to help you accurately calculate the tax to withhold. You can use:
- Your accounting or payroll software: Most modern payroll systems automatically calculate tax based on the current rates.
- The ATO’s tax tables: If you’re not using payroll software, you can refer to the tax tables available on the ATO website.
- The tax withheld calculator: An online tool provided by the ATO to help you determine the correct amount of tax to withhold.
What If I Make a Mistake?
Mistakes can happen, but it’s essential to correct them as soon as possible. If you realize you’ve withheld the wrong amount of tax, update your payroll records and adjust your next pay run accordingly.
Don’t Forget to Pay Super Guarantee (SG)
Super guarantee (SG) is a mandatory contribution you must make on behalf of your employees to their superannuation funds. Ensuring you pay the right amount of SG—and doing so on time—is crucial to avoid penalties and ensure your staff’s future financial security.
What is the Super Guarantee?
The super guarantee requires employers to contribute a minimum percentage of their employees’ ordinary time earnings (OTE) to their super fund. From 1 July 2024, the SG rate will be 11.5%, and it is scheduled to increase to 12% in 2025.
When Are Payments Due?
The next SG payment deadline is 28 October. To avoid paying the super guarantee charge (SGC)—which includes penalties and interest—make sure you pay your employees’ super contributions in full by the due date. The SGC is more than the amount you would have paid in SG, so it’s always best to pay on time.
How to Calculate Super Guarantee
To help you calculate the exact amount of super you need to pay, use the ATO’s Super Guarantee Contributions Calculator. This tool takes the guesswork out of the process, ensuring you’re compliant with SG obligations.
Checklist to Stay Compliant
The ATO offers an SG checklist that helps employers stay on track with their super obligations. Make sure you review this checklist regularly, particularly if you’re managing new hires or temporary staff during peak seasons.
Report Through Single Touch Payroll (STP)
Single Touch Payroll (STP) is a streamlined way for employers to report employee payroll information, including salaries, wages, PAYG withholding, and superannuation, to the ATO. If you haven’t started reporting through STP yet, now is the time to get on board.
Why STP Matters
STP makes reporting payroll information more straightforward and reduces your end-of-year administrative burden. It also ensures that the ATO receives accurate information about your employees’ income and super contributions.
Do You Need to Report Through STP?
If you’re a new business or have recently hired staff, you’re required to report through STP from your first payday. If you’re still not reporting through STP and don’t have an approved exemption, deferral, or concession in place, start reporting now to avoid penalties.
What Happens to Employee TFN Declarations?
When you report through STP, you don’t need to send employee tax file number (TFN) declarations to the ATO. The information is automatically included in your STP report, making the process smoother. However, you’ll still need to keep this information for your own records.
When to Cancel an ABN
If your business is no longer operating or trading, it’s crucial to cancel your Australian Business Number (ABN). The ATO regularly reviews ABN entitlements and may cancel your ABN if there’s no evidence of business activity. Keeping inactive ABNs can result in unnecessary audits or complications, so it’s best to cancel them promptly if you’re no longer in business.
Final Thoughts: Keeping Your Tax and Super Obligations in Check
The festive season can be a busy time for businesses, especially when it comes to hiring new employees. However, staying on top of your tax and super obligations doesn’t have to be overwhelming. By withholding the right amount of tax, paying super on time, and reporting through STP, you can keep your business compliant and avoid penalties. If you’re unsure about any aspect of your employer obligations, it’s always a good idea to consult with a registered tax professional or reach out to the ATO for assistance.
Stay Compliant with Super and Tax Obligations for Holiday Hires
Managing super and tax obligations for holiday hires doesn’t have to be stressful. Contact our team today to ensure your business remains compliant with super and tax obligations this festive season.