A payroll return, often referred to as the Pay As You Go (PAYG) withholding report, is a mandatory submission by employers to the ATO. It details the total amount of tax withheld from employee salaries and wages. This process ensures that the correct amount of tax is collected throughout the year, reducing the burden on employees at the end of the financial year.
Key Components of Payroll Return
1. PAYG Withholding.
PAYG withholding is the system through which employers collect tax from payments made to employees. Employers are required to withhold amounts from salaries, wages, bonuses, and other payments and remit them to the ATO.
2. Superannuation Contributions
Employers must also include superannuation contributions in their payroll returns. Superannuation is a retirement savings scheme mandatory for all employees earning above a certain threshold.
3. Fringe Benefits Tax (FBT)
Fringe benefits provided to employees, such as company cars or low-interest loans, are subject to FBT. These benefits must be reported in the payroll return to ensure the correct tax is applied.
4. Single Touch Payroll (STP)
Single Touch Payroll (STP) is a streamlined reporting process that allows employers to report payroll information to the ATO in real-time. This includes salaries, wages, PAYG withholding, and superannuation information.
Steps in the Payroll Return Process
Collect Employee Information
Accurate employee information is crucial for payroll returns. This includes personal details, Tax File Numbers (TFNs), and superannuation fund information.
Calculate PAYG Withholding
Employers need to calculate the correct amount of tax to withhold from employee payments. This is based on the employee’s earnings and the applicable tax rates.
Report via Single Touch Payroll
Using STP-enabled software, employers report payroll information to the ATO each pay cycle. This ensures that the ATO has up-to-date information on employee earnings and tax withheld.
Pay Superannuation
Superannuation contributions must be made to the employee’s chosen fund by the quarterly due dates. These contributions are also reported via STP.
Prepare and Submit Annual Payroll Reports
At the end of the financial year, employers must submit an annual payroll report to the ATO. This report summarizes the total amounts paid to employees and the total tax withheld.
