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  • While people work for you

    Once you hire a worker, you have additional tax and super obligations to meet while they work for you.

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    You may have different obligations if your worker is a contractor or volunteer.

    You'll also have other obligations, including state payroll tax and employment laws. A range of information to help you understand your obligations for employees pay, leave and entitlements is available at Link.

    Withholding amounts from payments

    Each time you make a payment to 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 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:

    Additionally, you'll need to pay, and report withheld amounts to us. How often you need to do this will depend on whether you're a:

    Super guarantee

    Super guarantee (SG) is not another tax or government revenue. Paying super is an important part of being an employer, as it provides for your workers in their retirement.

    Generally, all employees are eligible for super. Some contractors are also eligible if they meet the additional eligibility requirements, so you'll need to 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.

    By law, we cannot extend the due date to pay SG. If you don't pay the right amount of SG for your employee on time and to the right fund, you'll need to lodge and pay the SG charge to us.

    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.

    Single Touch Payroll

    Single Touch Payroll (STP) works by sending tax and super information from your STP-enabled payroll or accounting software to the ATO, as you run your payroll.

    Each time you pay your employees through STP-enabled payroll software, you send us a report which includes:

    • salaries and wages
    • amounts withheld
    • super liability information.

    At the end of the financial year, you'll need to finalise your STP data. This will allow your employees to access their ‘tax ready’ income statements through myGov in ATO online services when preparing their tax return.

    For any payments not reported and finalised via STP (for example, if you're exempt from using STP), you must:

    For more information, see Single Touch Payroll Phase 2 employer reporting guidelines.

    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. This amount is then multiplied by the FBT rate.

    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
    • paying an employee's gym membership
    • reimbursing an expense incurred by an employee, such as school fees
    • deductions for work related-travel expenses.

    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 2022.

    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 for the relevant financial year.

    Keep the right 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.

    Stay on top of key dates

    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.

    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 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.

    Contractors working for you

    If your worker is a contractor, you'll have different obligations than if they were an employee.

    You must 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.

    For some individual contractors, even if they provide you with their ABN, you may need to pay super guarantee.

    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 to not 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.

    Volunteers working for you

    Your volunteers can be paid in cash, given non-cash benefits, or given a combination of both cash and non-cash benefits.

    These payments are given various descriptions, including:

    Sometimes, no name is given at all. The name or description of the payment doesn't determine its treatment for tax purposes – it depends on the nature of the payment and the volunteer’s circumstances.

    Generally, payments to volunteers don't need to have tax withheld from them.

    However, you may be required to withhold from a payment to a volunteer where both of the following applies:

    • the payment is for a supply of goods or services made in the course of an enterprise carried on by the volunteer
    • the volunteer has not quoted their ABN.

    Additionally, volunteers are not eligible employees for super guarantee.

    Authorised by the Australian Government, Canberra.

    Last modified: 30 Mar 2022QC 67963