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Tax and super for new employees

posted in Employee Entitlements, Fair Work by

Tax and super contribution obligations are not only core components of business operation, but are mandatory by law. Engaging new workers without considering your business’ legal tax and super obligations could result in hefty fines for employers.  Before hiring new staff, make sure your business is set up with a well managed payroll service and that your workers are compliant with Australian legal requirements for employment. Answer the following questions to determine your level of compliance.

How do I know if a new worker can legally be employed in Australia?

In order to be legally employed in Australia, an employee must be an Australian citizen, a permanent resident or a non-citizen with a visa which allows them to work. If you are in doubt that a potential employee will meet these standards, you can request formal documentation to prove their working status (such as a photocopy of their visa or passport).

How do I determine a salary for a new employee?

Before determining a salary for a new employee, you must nominate the type of employment.  Will the employee work on a full time, part time or casual basis. Then, the correct rate of pay for your new employee will be based on their employment type and the award which covers their role. The award will state the minimum wage or transitional provisions that apply to base rates, casual loadings, weekend and public holiday rates, penalty rates and shift allowances.

Tip: All of the conditions surrounding an employee’s rate of pay must be noted in an employment contract. It is imperative to make sure your employee’s contract complies with the National Employment Standards (NES). If it does not comply, then the NES will overwrite the contract.

How do I manage payroll services when engaging a new employee?

For the majority of new employees, your business will need to withhold tax and make superannuation contribution payments.

  • Tax

For most employees, you will need to withhold tax at each pay date and send it to the Tax Office (ATO). If you haven’t already done so, you will need to register for Pay As You Go withholding (PAYG withholding) with the ATO and calculate how much you will be required to withhold from the new employee’s payments. Be aware that further taxes, including the Fringe Benefits Tax (FBT), may also apply.

  • Super

You must legally pay superannuation contributions for employees and contractors who you pay more than $450 before tax in wages per month. If you don’t already have one, you need to establish a default super fund in order to pay super contributions to employees who have lost or do not have an established super account with a particular super company. You can use a superannuation contributions calculator to determine how much you must contribute to your new employee’s super fund.

Outsourcing payroll in Australia is a good way to ensure your business is making the obligatory contributions for tax and super for each employee. i3Group’s online payroll systems make tax and super contribution payments easy to manage. If you need help managing payroll services, get in touch with us today by clicking here.

03 Dec, 14

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