Employment And Payroll Compliance

The management and reporting of employee and payroll functions of a business is an important aspect of running a business. As well as ensuring all employees are correctly paid there are serious reporting aspects that have significant consequences if not completed correctly and on time.

 Payroll compliance requirements include:

*  Pay rates comply with Fair Work, National Employment Standards and Awards/Enterprise Agreements

 * Superannuation Guarantee - as well as ensuring all employees receive their correct pay, employers are required to pay a minimum percentage of an             employees ordinary times earnings into their super fund. The current rate is 11.5% increasing to 12% by July 2025.

 * PAYG Withholding Tax - Employers must withhold the correct tax from the employee gross wages and remit these amounts regularly to the ATO and  report the amounts using the Activity Statements.

* Single Touch Payroll (STP) - this is a mandatory reporting system requiring employers to report salaries, wages, PAYGW and super directly to the ATO  each pay cycle. The reporting is required to be electronic utilising approved software.

Employment and payroll compliance in Australia is a critical responsibility for employers. By understanding and adhering to legal requirements,  businesses can foster a fair and lawful workplace while avoiding costly penalties. Staying pro-active and informed is key to maintaining compliance and  supporting a productive workplace.

Should a business not comply in a timely manner there are numerous penalties and charges that are able to be enforced. These include;
1. Superannuation Guarantee Charge
2. General Interest Charges
3. Late Penalty Notices
4. Director Penalty Notices
5. Garnishee Orders
6.  Liquidation of Assets

Super Guarantee Charge

 If you don't pay an employee's super guarantee (SG) amount in full, on time and to the right fund, you must:

 * pay the super guarantee charge (SGC)

 *lodge an SGC  with the ATO.

The SGC is more than the super you would have otherwise paid to the employee's fund and is not tax deductible.

 Working out the Super Guarantee Charge (SGC)

 The SGC includes:

1. the SG shortfall, made up of

2. SG calculated on salaries and wages (including any overtime)

3. any choice liability, based on the shortfall and capped at $500

4. nominal interest of 10% per annum (accrues from the start of the relevant quarter). The nominal interest component is calculated from the first day of the quarter, to the quarterly due date or the date the quarterly SGC statement is received by the ATO (whichever occurs later)

5. an administration fee of $20 per employee, per quarter.

The easiest way to work out the SGC is to use the SGC Worksheet or by contacting your accountant.

 How to Lodge your SGC

There are 3 ways to lodge your SGC statement:

         Completing the SGC Statement and lodge using the ATO online services,

         Use the SGC calculator on the ATO online services site – the statement will also calculate your SGC liability.

         Use the SGC statement and calculator  to generate a PDF version of your statement. You can print this and mail it to us.

General Interest Charge

If you don't pay on time, we will automatically add a general interest charge (GIC) to what you owe. Your debt will grow each day your debt remains unpaid.

Interest calculates on a daily compounding basis on the amount overdue and is added to your account periodically.

We revise GIC interest rates quarterly.

You can request a remission of some, or all, of your interest. We may remit the interest if you have extenuating circumstances which caused your delay in payment.

Director Penalty Notice (DPN)

A DPN is a Notice that the ATO can send a director. A DPN can make that director personally liable for three types of tax debts of a company:

1. Pay As You Go (PAYG)

2. Superannuation Guarantee Charge (SGC) liabilities

3. Goods and Services Tax (GST)

 The issuance of a DPN can place significant financial responsibility on directors, compelling them to address their company’s tax obligations or face personal liability. There are two types of notices:

1. Lockdown DPN: If a company fails to pay taxes and also fails to lodge the required documents for PAYG, BAS, GST or SGC, a lockdown DPN may be issued. This makes the director immediately liable for the tax debt with no relief available except for paying the debt in full.

2. Non-lockdown DPN: Alternatively, if the company has lodged the required documents but has not made payments, a non-lockdown DPN may be issued. Directors have 21 days to pay the debt, appoint a Voluntary Administrator, appoint a Small Business Restructuring Practitioner (SBRP) or appoint a Liquidator.

Consequences

Failure to comply with a DPN can have severe consequences, including personal liability for the company’s tax debts. Directors are responsible for ensuring their company’s tax and super obligations are reported and paid on time.

If the company has an overdue debt with the ATO and doesn’t pay the amount owing or contact the ATO to make alternative arrangements, the ATO may issue a DPN. DPNs are issued to current directors and anyone who was a director at the time the company failed to pay. If the ATO issues a DPN, immediate action is essential. Ignoring a DPN or failing to take appropriate steps within the specified timeframe can lead to significant financial and legal repercussions.

 DPNs can have significant impacts on small business owners. From 1 July 2023 to 29 February 2024, ATO has issued 13,454 DPNs. These statistics reflect an already increased number of DPNs being issued post-Covid.

Garnishee notice

We can issue a garnishee notice to a person or business that holds money for you or may hold money for you in the future. This requires them to pay your money directly to us to reduce your debt. We'll send a copy of the notice to you.

For individuals, we may issue a garnishee notice to:

• your employer or contractor
• banks, financial institutions and building societies where you have accounts
• people who owe money to you from the sale of real estate, such as purchasers, real estate agents and solicitors.

For businesses, we may issue a garnishee notice to:

• your financial institution
• trade debtors
• suppliers of merchant card facilities.