Obligations when people work for you
Once you hire a worker, you have additional tax and super obligations.
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Media: Employers: resources to help you meet your obligations
https://tv.ato.gov.au/ato-tv/media?v=bi9or7od3sesj7 (Duration: hh:47)
Single Touch Payroll
Each time you pay your employees, you'll need to report their tax and super information to us through Single Touch Payroll (STP) enabled payroll software.
- salaries and wages
- amounts withheld
- super guarantee liability information.
STP was expanded from 1 January 2022. Unless your digital service provider has informed you they've been granted a deferral or you've applied to us for a delayed transition, you should be reporting expanded information through STP Phase 2 enabled software. For more information, see Employer STP Phase 2 checklist.
By 14 July each year, you'll also need to check your information is correct and make an end-of-year finalisation declaration through STP. This is important so your employees can access their information to complete their income tax return.
How you report your payroll information to the ATO depends on your situation and the payroll software you use. Our STP Get ready checklist will guide you through the steps so you'll be ready to start reporting to help you send your first STP report to us successfully.
Small employers – closely held (related) employees
If you are a small employer (19 or fewer employees) with closely held (related) employees) you can choose to report:
- actual amounts paid to closely held employees on or before the date of payment
- actual payments made to closely held payees quarterly
- a reasonable amount quarterly.
You must still report the amounts paid to other employees (also known as arm's length employees) on or before each payday.
Additionally, if you have both closely held and arm's length employees you'll need to make an end-of-year finalisation declaration through STP for:
- closely held employees by 30 September each year, however
- you must still make a finalisation declaration for your arm's length employees by 14 July.
If you only have closely held payees, you have until the due date of the closely held payee’s individual income tax return to make a finalisation declaration for a closely held payee. This is usually 31 October.
For more information, see STP Small employers - closely held (related) payees.
When hiring a worker, you must determine if they are an employee or contractor.
It's important because:
- it affects your tax, super and other obligations
- penalties and charges may apply if you get it wrong.
Contractors working for you
If your worker is a contractor, you'll have different obligations than if they were an employee.
- withhold tax from payments you make to contractors if they:
- don't quote their ABN to you, or
- have a voluntary agreement with you to withhold tax from their payments.
- pay super guarantee for contractors if they meet the extended definition of 'employee'. For these contractors, even if they provide you with their ABN, you will need to pay super guarantee.
Contractors and end of financial year
When you withhold tax from payments you make to contractors because they didn't quote their ABN to you, at the end of the financial year you'll need to:
If you withhold tax from payments you make to contractors because they have a voluntary agreement to withhold tax, you can voluntarily report those payments through STP.
If you choose not to report those payments through STP, at the end of the financial year you'll need to:
If your worker is a contractor, you may also need to lodge a taxable payments annual report (TPAR) each year, detailing the payments you've made to them for their services.
Withholding amounts from payments
Each time you pay your worker, you're required to withhold a portion of their pay for tax. This is called pay as you go (PAYG) withholding.
By withholding tax, you're helping your worker meet their end-of-year tax liabilities.
You'll need to pay the amount withheld and report the amount withheld to us both:
How often you need to pay and report on activity statements depend on whether you're a:
You'll need to collect PAYG withholding amounts from payments you make to a worker, including if they're:
- an employee (this includes if they're a director)
- a contractor with a voluntary agreement or who don’t quote their Australian business number (ABN).
The amount of tax you withhold will depend on your worker's individual circumstances.
For example, there are different withholding rates for:
It's important to withhold the right amount of tax from payments you make to your worker.
To do this, use:
You need to calculate and pay Super guarantee (SG) for your eligible workers at least four times a year - payment due dates occur quarterly on 28 October, 28 January, 28 April and 28 July at the correct rate.
Super is not another tax or government revenue, it is your workers' entitlements. Paying super is an important part of being an employer, as it provides for your workers in their retirement.
Our Super guarantee compliance snapshot 2021-22 factsheet, (PDF, 602KB)This link will download a file demonstrates that we recognise the importance of super and the role it plays.
Most employees are eligible for super, and you must pay super for some contractors too if they meet additional eligibility requirements. You'll need to consider your employment contract and working arrangement for each worker and work out if you have to pay super.
You'll also need to know the amount of super to pay and when, and how and where to start paying super contributions. It's important to:
- Offer eligible workers their choice of super fund and in some situations, you may need to request their stapled fund details from us.
- Make sure your payroll and accounting systems are up to date to ensure they correctly calculate the amount of super you need to pay using the correct rate.
It's important to pay super for your workers on time.
If you miss a due date
By law, we can't extend the due date to pay. If you don't pay the right amount of super for your workers on time and to the right fund, you'll need to lodge a super guarantee charge (SGC) statement and pay the SGC to us.
Calculating the SGC is different to calculating the SG contributions you pay when you pay on time as it is based on salary and wages. Salary and wages are similar to OTE but also include any overtime payments.
The SGC is more than the super contribution you would have otherwise paid to the employee's fund and is not tax deductible. You may also face additional penalties, which can be up to 200% of the SGC.
Calculating how much super you need to pay
The minimum superannuation you must pay for each eligible employee is the SG rate applied to their ordinary time earnings (OTE). You need to be aware of what the SG rate is at the time of the quarter you are paying for.
Make sure you know what payments are counted as OTE.
We have provided examples to help you work out how much super to pay. You can also use the SG contributions calculator.
Learn more about super guarantee
To understand the importance of super guarantee and how to meet your super obligations, complete the Super guarantee employer obligations course.
Fringe benefits tax
Fringe benefits tax (FBT) is a tax you pay on certain benefits you provide to an employee, including their family or other associates. It's separate from income tax and is calculated on the taxable value of the fringe benefit.
There are different types of fringe benefits that you can provide to your employee. Some common examples include:
- allowing an employee to use a work car for private purposes
- providing an employee car parking
- paying an employee's gym membership
- reimbursing an expense incurred by an employee, such as school fees.
When providing fringe benefits to your employee, you'll need to self-assess your FBT liability for the FBT year (that is, 1 April to 31 March).
If you have an FBT liability, you must lodge an FBT return and pay the amount of FBT you owe for the FBT year. If you prepare your own FBT return, your lodgment and payment due date will be 21 May. If you use a tax agent, the due date may differ.
If the due date falls on a weekend or public holiday, you can lodge and make payment on the next business day. For more information, refer to Fringe benefits tax time 2023.
If you provide an employee certain fringe benefits exceeding $2,000 in an FBT year, you must report the grossed-up taxable value of those benefits, known as reportable fringe benefits, on their payment summary or through STP.
To work out how much FBT you have to pay, you 'gross-up' the taxable value of the benefits you've provided. This reflects the gross salary your employees would have to earn, at the highest marginal tax rate (including Medicare levy), to buy the benefits themselves. The FBT you owe is the grossed-up amount multiplied by the FBT rate.
Make sure you are aware of what FBT exemptions and concessions you can use to reduce your FBT liability.
If you were required to pay FBT of $3,000 or more in the past financial year, then you need to lodge your BAS and pay quarterly FBT instalments. This will reduce the amount you have to pay when your lodge your FBT return. If you overpay, you will receive a credit.
When a worker leaves
When an employee or contactor stops working for you, you still have obligations and may need to:
- make employment termination payments
- report those payments to us
- meet SG obligations
- meet FBT obligations.
It's important you stay on top of your reporting, lodgment and payment due dates. If you don't, it could cost you money in penalties.
To easily see when your lodgments and payments are due and to action them seamlessly, use the ATO app.
If you're a small business, our calendar of key dates will help you lodge and pay on time – see these in the Small business newsroom.
Alternatively, visit Due dates for lodging and paying. We recommend pencilling these in your calendar, so you don't forget.
Note: even if you report PAYG withholding through STP, you still need to report the same amounts on your activity statements and pay the amount owed.
If you miss a due date
We understand that unexpected life events can make it hard to meet your employer obligations, and so we have support available to help you.
For example, we offer eligible businesses and not-for-profits:
- an extra 2 weeks to lodge and pay their quarterly activity statements, and to receive and lodge them online
- payment plans – depending on the amount owing, you can propose a payment plan through our online services.
If you're experiencing financial difficulties, see support for your situation.
By law, we're unable to extend the payment due date for your employee's super. If you miss the quarterly due date, you'll become liable for the super guarantee (SG) charge.
This means you'll need to:
- lodge an SG charge (SGC) statement to us within a month of the quarterly due date
- pay the SG charge to us.
By lodging an SG charge statement by the due date, you'll avoid additional penalties. If you can't pay in full, we'll work with you to set up a payment plan.
Firmer action will be taken for those unwilling to meet their super obligations. We will raise an additional penalty, known as a ‘Part 7 penalty’ which can be up to 200% of the SGC payable amount, if you don’t:
- lodge the SGC statement by the due date, or
- engage with us.
Resources for employers
A good knowledge of your obligations as an employer is essential for getting your tax and super right.
Subscribe to our channels
We have different ways to communicate to you depending on what type of business you are. You should subscribe to our newsroomsExternal Link and follow us on social media to make sure you are kept informed.
Join our webinars
We regularly hold webinars to help you understand your obligations as an employer. You can register to join upcoming webinars live or you can watch recordings of previous webinars and other informational videos on our atoTV webinar channelExternal Link.
Keep up to date with changes
Changes to legislation happen often and, in some cases, can take effect retrospectively. To make sure you are on top of your obligations, it's important to keep your payroll and accounting systems up to date and have regular discussions with your tax professional.
Keep good records
Keeping employment and contractor records is an essential part of running your business and helps you to claim all your deductions.
Records will vary depending on whether your worker is an employee or a contractor, so it's important you know the difference before you hire.
For more information, see Employment and payroll records for business.
Authorised by the Australian Government, Canberra.
Once you hire a worker, you have additional tax and super obligations.