Businesses who take on employees often find the process exciting – a new starter can bring about new ideas, a better approach to the job, greater efficiency, and even a more manageable workload for the owner. But before you dive in head first and integrate a new employee, it’s important to have everything set up and ticked off well ahead of their first day.
Forms and Paperwork
As much as filling out paperwork is one of the more tedious aspects of business ownership, it is fairly inevitable when it comes to hiring new staff members. The Australian Taxation Office (ATO) has a few to get you started, with the Tax File Number (TFN) declaration form and superannuation Standard Choice Form being two mainstays of the new starter procedure in Australia. Both of these are a must, and need to be sent to the ATO within two weeks and four weeks (respectively) of the employee commencing work. Of course, sending it in earlier is even better! If you’re hiring a working holiday maker, be sure to check the Visa Entitlement Verification Online (VEVO) to check the visa subclass of your employee. Subclasses 417 (Working Holiday) and 462 (Work and Holiday) are the most common, and the Australian Government has plenty of information online about what is expected of employers taking on working holiday makers.
Beyond the tax, super and visa formalities, check out any relevant industry awards that may apply to new starters, and make sure that is reflected in their contract of employment. It’s also smart to have basic employee information on file, such as address, date of birth, allergies and emergency contacts, qualifications and start date. This data could prove useful down the line, particularly in the case of employee termination (should it arise), or if the ATO or other government organisation requests information about their employment. It is also recommended that you obtain a copy of some form of photo ID to ensure the information provided to you matches to them as a person.
Tax Obligations
Part and parcel of having a job is paying tax – and when you’re running a business and hiring employees, this is especially relevant. Not only does your business have to pay tax, you also have to withhold tax on behalf of your employees. Depending on the employee’s wage and employment status (e.g. working holiday makers, foreign residents etc.), your Pay As You Go (PAYG) tax withholding obligations may differ. For residents, the tax rates for the 2019-20 financial year are as follows:
| Taxable Income | Tax on this Income |
|---|---|
| 0 – $18,200 | Nil |
| $18,201 – $37,000 | 19c for each $1 over $18,200 |
| $37,001 – $90,000 | $3,572 plus 32.5c for each $1 over $37,000 |
| $90,001 – $180,000 | $20,797 plus 37c for each $1 over $90,000 |
| $180,001 and over | $54,097 plus 45c for each $1 over $180,000 |
Another consideration is Fringe Benefits Tax (FBT). If you provide certain benefits to your employees, such as free tickets to concerts; allowing them to use a work car for personal trips; or paying their gym membership; you may be liable for FBT. If you’re taking on an employee and have promised certain fringe benefits, be sure that you’re aware of what you may be up for with the ATO.
Cloud Accounting Setup
Gone are the days of complicated spreadsheets and mundane manual data entry to keep up with your accounting and bookkeeping. The development of cloud technology and accounting software means that these processes are now not only much easier and quicker, but also help you remain compliant with tax legislation. To get the best out of these pieces of software, set your employees up on the system before they commence work for your business. As part of the initial employee information you collect from a new starter, ensure you capture their bank account information, TFN and Superannuation fund information, along with an agreed-upon salary or hourly rate. This data then feeds into the accounting software you use and will make payroll significantly easier each time you process it.
Do you need a hand getting ready to take on staff? At MP+, we’re passionate about helping business owners thrive, and our in-house bookkeeping team at CFO2Go are experts in getting you on the cloud and up to date. Give us a call on 08 9301 2200 or visit www.mckinleyplowman.com.au.
