Make sure you’re up to date on payroll compliance
How employers can understand and meet their payroll obligations and some of the common issues seen by the ATO.
How to meet your employer obligations
The ATO wants to help you ensure your entity’s payroll governance measures are designed effectively and fit for purpose. This means they are appropriate for the entity’s structure, size, complexity and industry.
To meet your payroll obligations, you should ensure:
- a formal payroll framework is documented that includes descriptions of roles and responsibilities to implement policies and procedures
- systems and controls are in place and periodically reviewed to ensure accurate reporting of:
- Single Touch Payroll (STP)
- pay as you go (PAYG) withholding
- fringe benefits tax (FBT)
- super.
- appropriate processes and procedures are in place to support your obligations and identify, assess and mitigate risks such as employee fraud and cybercrime
- key payroll and accounting staff have the skills and knowledge to perform their role – if they are in different departments, they should each be aware of the scope of their function and responsibilities
- good record-keeping practices are in place.
Understand your employer obligations
When starting a business, ensure all remuneration arrangements including PAYG withholding, FBT and super guarantee (SG) are:
- set up correctly in your payroll software
- comply with payroll administration requirements.
Routinely review your policies and procedures for any changes that impact your business. For example:
- Operating without required registrations and failing to report or lodge on time may attract the ATO’s attention and incur interest and penalties
- Understand PAYG withholding thresholds that may change your payer status from a small-medium withholder to a large withholder because this determines the frequency and method of reporting and paying.
Common issues with payroll governance
The ATO has observed these common issues with payroll and governance. You are encouraged to review your existing frameworks, practices and processes with these points in mind, namely:
- STP reporting and its relationship to BAS W2 and PRN EFT 70
- Payment Reference Numbers (PRN), Australian Business Number (ABN) and branch numbers
- Discrepancies between PAYG withholding amounts paid and reported
- Payroll Service Providers (PSP) issues.
Ensure roles and responsibilities are clearly defined and it is understood who is accountable for payroll administration.
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Source: ATO
