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  • Paying your workers

    If your business has employees or contractors, there are some extra things you need to do. This applies even if they are family.

    Find out about:

    TFN declaration

    On the first day an employee starts working for you, you should ask them to complete a Tax file number declaration (NAT 3092). They don't have to tell you their TFN, but if they don't, you will have to take tax from their pay at the highest rate. An employee has 28 days to provide their TFN to you.

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    PAYG withholding

    When you have employees, you must take tax from their pay. This is called pay as you go (PAYG) withholding. PAYG withholding makes it easier for your employees to pay their tax, because you collect it from them throughout the year.

    You need to register for PAYG withholding if you pay:

    • employees
    • company directors and office holders
    • people you employ with a labour hire arrangement
    • people from whom you have agreed to withhold PAYG (for example, some independent contractors).

    Norfolk Island businesses don’t need to withhold any PAYG withholding from suppliers who don’t provide an Australian business number (ABN). This ‘No ABN’ PAYG withholding only applies to Australian mainland businesses.

    The amount of tax you should take out from an employee's pay depends on how much they earn and the information on their TFN declaration form.

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    Payment summaries

    At tax time, you need to give each of your employees a PAYG payment summary. This shows how much income they earned and how much tax you took out of their pay for the financial year (1 July – 30 June). You need to do this by 14 July each year.

    You also need to lodge a PAYG payment summary statement (NAT 3447) with us by 14 August each year.

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    Paying super for your employees

    As an employer, you must pay superannuation (super) contributions for eligible employees. This is known as super guarantee (SG).

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    Paying contractors

    If you hire a contractor to work for your business, there are some different tax and super rules. So it's important to understand the difference between employees and independent contractors.

    Contractors run their own business, so you do not need to withhold tax or make super contributions for them; they are responsible for themselves.

    See also:

    Last modified: 13 Mar 2017QC 51477