Tips To Best Manage Payroll Compliance

|by Kamil Qureshi|Taxation and Compliance

Payroll compliance remains one of the biggest but preventable areas of risk for many businesses. Payroll is a process that, done well, should be invisible to the rest of the business.

** Most common mistakes businesses make with their payroll **

incorrect withholding of PAYG creating problems for employees at tax time

  • incorrect allocation of payroll related transactions in the accounting system
  • businesses that struggle to meet the cashflow obligations of PAYG withholding tax and superannuation
  • poorly managed (sometimes unlawful) salary sacrifice arrangements
  • lack of transparency of accrued leave (especially long service leave)
  • employee entitlements not correctly recognised in the accounting system.
  • employees unintentionally paid below Award

Staff are at the heart of your business. A well-managed payroll function can preserve the organisational culture and protect against the ill effects of payroll compliance risk – such as lost productivity, cashflow pressures, ATO penalties and even industrial relations action against your business.

** How to avoid errors **

Regardless of the size of your business the following tips can help eliminate errors if properly applied.

  1. Modernise your systems: Ensure your software is future-fit by adopting a cloud-based payroll system that integrates with your accounting system. This eliminates the need to manually enter data multiple times and reduces the risk of inconsistencies between systems. This will also ensure you’re ready for the looming STPR deadlines.
  2. Be ahead of STPR – lodge and pay the same time as payroll: Don’t wait until the end of the month or quarter to pay your PAYG withholding tax and superannuation liabilities? By preparing your cashflow budget where employee liabilities are paid in full every pay run, you not only have a better perspective of your business’ cash position, but you reduce the risk of penalties, interest, and upset employees when the payment deadlines are missed – not to mention, it’s two less things to diarise and think about!
  3. Reconcile key accounts every pay run: Often, checking on the payroll-related accounts in the accounting software is a month-end or quarter end task. To best protect against payroll compliance risk and excessive time spent correcting the accounting records, reconcile key accounts like PAYG withholding payable, superannuation payable and leave liabilities every pay run.
  4. Register for alerts for legislation changes: Payroll related legislation, especially Awards, can change frequently. Keeping up to date with these is critical to ensure staff are paid correctly and payroll compliance risk is minimised. Key legislation and regulations include (but are not limited to):

Fair Work Act 2009 and amendments

  • National Employment Standards
  • Industry and Occupation Awards
  • Superannuation Guarantee Rulings
  • Long service leave (state based)
  • Payroll tax (state based)
  • Workers compensation legislation (state based)
  • Australian Taxation Office updates.

**Payroll tax **

The table below details the weekly, monthly and yearly payroll tax threshold for our QLD and NSW based clients.


** You must report the following taxable wages when lodging your payroll tax return **

cash and non-cash wages

  • third-party payments
  • salary sacrifice amounts.
  • Salary sacrifice amounts are cash wages that an employee has chosen to forgo in return for other benefits.

**In general, wage payments are liable for payroll tax if they are: **

a reward for services rendered by an employee, deemed employee or director

  • payments to which the recipient has an enforceable right.
  • This guide includes common payments employees receive and identifies which of these payments are taxable.

In conclusion, the introduction of Single Touch Payroll Reporting is the Australian Taxation Office’s first whole of economy big data initiative to collect real-time transaction and compliance information, creating significant changes for how businesses across the country report to and engage with regulators so there is no better time than now to get your payroll in order.

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