Archived News - 2005
2005-08-25
Your Employee Obligations
If you employ contractors or staff in your business, your obligations to your personnel extend beyond your day-to-day tax and superannuation responsibilities.
You need to be familiar with these wider responsibilities to ensure you are looking after your legal obligations towards your workers.
These responsibilities can arise from a variety of sources such as federal and state laws, contracts of employment (written or verbal), industrial agreements and awards.
Your obligations in the following areas are outlined briefly below:
- wages and record keeping
- employee health and safety
- insurance; and
- federal and state taxes
You will need to check your own state or territory laws for details on things like state taxes (e.g., payroll tax) and employment laws and regulations.
Wages and record keeping
Make sure you pay your employees their correct wages, particularly if they are employed under an award or industrial agreement.
TIP
It's also a good idea to a have a clear policy about whether and how you reimburse your employees for any work related expenses.
Whilst you are no doubt aware of the range of records you are required to keep for tax purposes, you should also be aware that employee awards or agreements usually also require you to keep specific employment records (e.g., for salary and wages).
USE CENTRELINK EMPLOYEES?
If you employ staff through Centrelink, you will be asked to provide wage and employment details for these employees.
Employee Health and safety
As a business owner you have certain rights and responsibilities regarding your staff's health and safety in your workplace. Generally, you are required to provide:
- safe premises;
- safe systems of work (e.g., safe machinery and other equipment);
- a suitable working environment and facilities; and
- information, instruction, training and supervision where appropriate.
The way in which these obligations apply may vary depending on your circumstances, so it's best to get advice about what's applicable to you.
Insurance
You are liable for compensation payable to any of your employees suffering work-related injury or disease.
To cover this, it's compulsory for employers in all states and territories to have workers compensation insurance through an approved insurer. Your insurer indemnifies you for costs of any claims.
As your obligations in this area vary across states and territories, you need to get advice relevant for your locality.
SELF EMPLOYED?
Workers compensation doesn't cover the self employed, so you'll need to consider taking out private insurance for yourself, e.g., income protection, trauma and disability insurance. You may be entitled to a tax deduction for the cost of this insurance.
Taxes
Working out your responsibilities in respect of your staff that can have tax consequences is a bit of a minefield. Here's a checklist of some employee responsibilities:
- remit PAYG withholding tax;
- pay fringe benefits tax if applicable;
- make compulsory superannuation contributions; and
- pay payroll tax if required to do so (this is a state or territory tax).
PAYG withholding
If your business has employees, you'll need to register for Pay As You Go (PAYG) withholding tax, withhold the appropriate amounts of tax from salary and wages and then pay these amounts to the Tax Office.
Here's some pointers to keep in mind:
- You must report and pay the withheld amounts to the Tax Office monthly or quarterly when you lodge your activity statements (BAS).
- You need to provide each employee with an annual payment summary of tax withheld (a "group certificate" in the old language) and provide an annual report on these amounts to the Tax Office.
- The ATO will send you a stationery package if you are registered for PAYG withholding tax (except if you report electronically) that includes copies of payment summaries and guidelines for completing payment summaries.
WHAT ABOUT CONTRACTORS?
Contractors are generally responsible for their own PAYG obligations. However, you can enter into a voluntary agreement with a contractor to withhold PAYG on their behalf.
Company or trust
If you run your business through a company or trust, keep in mind that directors can be treated similarly to employees for PAYG purposes.
Sole trader or partner
If you are a sole trader or partner in a partnership, the rules regarding payment of wages, withholding tax and superannuation, will not be directly applicable to you. You will generally pay tax on your share of your business' taxable income.
Fringe benefits
If you provide taxable fringe benefits to your employees, you will have to report and pay fringe benefits tax (FBT).
Provide fringe benefits?
If you provide taxable fringe benefits to your employees or to associates of your employees (typically family members), you may have an FBT liability.
Examples of common taxable fringe benefits include: use of a work car for private purposes, cheap loans, entertainment and the payment of private health insurance costs.
Some benefits are exempt from FBT. For example, laptop computers (one per FBT year per employee), mobile phones mainly used for work, benefits of less than $100, some taxi travel and in-house health care facilities.
DON'T OVERLOOK THIS.
If you provide an employee with more than $1000 (grossed-up) of reportable fringe benefits in an FBT year, you must report this amount on the employee's payment summary.