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Pay As You Earn

PAYE Bulletin 1

For Employers

Date of Issue: 1 July 1999


Valid from 1 July 1999

About this bulletin

This bulletin explains the Pay As You Earn (PAYE) system of taxation. It provides an overview for new employers.

What is PAYE?

The PAYE system (also known as group tax) is the way salary or wage earners pay their tax and Medicare levy by instalments deducted from their pay. As an employer, you make the deductions from your employees' salary or wages and pay them directly to the Tax Office.

At the end of the financial year, you give each employee a Group Certificate which shows how much the employee earned during the year and how much tax was deducted. Your employees then include their Group Certificate in their tax returns.

What do I have to do as an employer?

Register with the Tax Office

If you start up a business in which you will employ people, or you are already in business and you become an employer, you must register with the Tax Office within 7 days. An Application for Registration as a Group Employer is available from the Tax Office. When you register you will be given a PAYE Account Number which you will need to use in all dealings with the Tax Office about PAYE. You will also be given a PAYE Employers' Payment Book and a Reference Guide for Employers which contains more information about PAYE.

Collect Employment Declaration forms

Your employees should fill out an Employment Declaration form when they commence work with you or there is a change to their circumstances. If they complete the appropriate section on the form, the amount of tax deducted from their pay will take into account the tax-free threshold, rebate entitlements and Family Tax Assistance, if applicable.

If an employee does not provide a completed form, you must deduct tax at the highest marginal taxation rate plus Medicare levy, currently 48.5%. Employment Declarations are in duplicate. You must send the original to the Tax Office within 28 days and keep the copy with your records.

Deduct tax

You must deduct tax from the salary or wage of each employee. The Tax Office publishes schedules which tell you how much tax to take out. The schedules are available for weekly, fortnightly and monthly pay periods. The information on the Employment Declaration will help you deduct the right amount of tax.

Tax calculations made easier

A computerised Tax Instalment Deduction Schedule (TID) calculator is now available on the Internet. This makes it a lot easier to work out how much tax to deduct from employees' wages, and replaces the paper schedules you may use. The TID Calculator can be downloaded from ATO assist - the Tax Office web site at www.ato.gov.au - or used on-line. If you wish, you may distribute copies of the TID Calculator to others.

If you don't have access to the Internet you can order the TID Calculator on floppy disk by phoning

1800 656 561. Although the software is free, a $10.00 postage and handling fee applies if you order it on floppy disk. The TID Calculator will run on any PC running Windows 3.xx or Windows 95.

Pay the tax deductions to the Tax Office

Where the total deductions made under PAYE, PPS and RPS are over $1 million annually, the tax will be required to be paid to the Tax Office within an average of 7 days by Electronic Funds Transfer.

If the combined deductions are between $25,001 and $1 million annually, the tax will be required to be paid to the Tax Office by the 21st day of the month following the month the tax was deducted.

If the combined amount deducted annually is $25,000 or less, the tax will be required to be paid to the Tax Office four times each year. If you think you may qualify to only send tax deductions to the Tax Office quarterly, please contact the Tax Office on 13 28 66 for more information.

Give each employee their Group Certificate

You must give each employee their Group Certificate by 14 July after the end of the financial year. This applies to continuing employees and any employees who have left your employment during the year. However, you must issue a Group Certificate to a terminating employee within 14 days:

  • • after an eligible termination payment is made; or
  • • where a terminating employee requests in writing that you issue them with a Group Certificate.

Complete a Reconciliation Statement

Each year you must complete a PAYE Employers' Annual Reconciliation and send it to the Tax Office with the original copy of all the Group Certificates you have issued and all the copies of any Group Certificates you have cancelled. These must reach the Tax Office by 14 August.

The PAYE Employers' Annual Reconciliation shows the number of Group Certificates you've used, the amount of tax instalments you've deducted from your employees' pay and the amount of tax instalments you've sent to the Tax Office.

Your 'PAYE Employers' Payment Book' and 'Reference Guide for Employers'

When you register with the Tax Office you'll be sent a PAYE Employers' Payment Book and a Reference Guide for Employers. This contains PAYE payment stationery and information about deducting and paying tax instalments, issuing Group Certificates and preparing your PAYE Employers' Annual Reconciliation. It also tells you about privacy and Tax File Numbers, eligible termination payments, the superannuation guarantee and other tax responsibilities you may have as an employer.

Your payment book is personalised with your name and address and your PAYE Account Number. It usually arrives within 14 days of our receiving your completed application for registration. Depending on the size of your annual remittances, each year you will receive a new PAYE Employers' Payment Book or each quarter a Quarterly Stationery Package, in the mail.

What should I do until my 'PAYE Employers' Payment Book' and 'Reference Guide for Employers' arrives?

If you haven't received your Payment Book, you must still deduct tax from your employees' pay. To help you deduct the right amount of tax, ask at any Tax Office for a schedule of tax rates. Alternatively, you can access the TID Calculator on the Internet.

If your Payment Book has still not arrived in time for you to make payments by the due date for payment, contact the Tax Office on 13 28 66.

Penalties

There are penalties that apply if:

  • • you don't register as a group employer (you may be liable for a fine up to $110 a day for each day you remain unregistered);
  • • you don't deduct the right amount of tax instalments from your employees' pay;
  • • you fail to submit an annual reconciliation to the Tax Office by the due date; or
  • • you fail to notify the Tax Office of a liability to pay PAYE tax. The notification of the liability due for payment must be made on or before the day on which the liability is due to be paid.

General Interest Charge

An interest charge, calculated daily on a compounding basis will apply if:

  • • a penalty, for not deducting the right amount of tax instalments from your employees' pay remains outstanding after the date it was due to be paid;
  • • a penalty, for not submitting an annual reconciliation to the Tax Office by the due date remains outstanding after the date it was due to be paid;
  • • a penalty, for not notifying the Tax Office of a liability to pay PAYE tax, remains outstanding after the date it was due to be paid;
  • • an amount of PAYE tax is not paid on or before the day on which the amount is due to be paid.

Do you need more information?

If you have any questions or need more information about PAYE you can contact the Tax Office:

  • • by telephone on our national enquiry number 13 28 66 . You can ring this number from anywhere in Australia for the cost of a local call;
  • • in person by visiting the enquiries counter at the Tax Office. Addresses for the Tax Office are listed in TaxPack, as well as in the White Pages telephone directory;
  • • by A Fax from Tax , our 24 hour fax information service. Simply call 13 28 60 (local call cost) on your phone or fax and follow the voice prompts; or
  • • at our Internet site, ATOassist www.ato.gov.au

ATO references:
NO NAT 2293-7.99

Related Rulings/Determinations:
PAYE Bulletin 1 - Notice of Withdrawal


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