Navigating the tax system to ensure you are meeting all your obligations as an employer can get confusing. In this article we look at some common areas of concern for business owners and provide some handy tools and tips.
Employee or Contractor?
When considering your employer obligations, making the right determination as to whether a worker is an employee or contractor is a good place to start.
The determination of a workers’ status can have significant tax and superannuation consequences. Use the ATO’s Employee/contractor decision tool to determine the correct status of your workers.
- A worker with an ABN isn’t automatically a contractor! Common employee/contractor myths
Tax to withhold and Super to pay
As an employer you have an obligation under PAYG withholding requirements to withhold tax from various payments to employees. You also have an obligation to pay superannuation to employees. Use these ATO tables to check that you are treating earnings, allowances, expenses, leave and bonuses correctly: Work out tax to withhold and super to pay
- Employers must also withhold amounts from other payments including certain allowances and leave, back payments, repayments, termination and redundancy payments: Withholding from other payments to employees
- As mentioned above, your withholding obligations will differ depending on the worker’s employment status: Employee or Contractor
Fringe benefits tax (FBT) is paid by employers on certain benefits provided to employees. Employers must self-assess their FBT liability each FBT year (1 April to 31 March). Getting expert advice to make sure you lodge your FBT return correctly is a good idea. Talking with a business and taxation adviser ahead of time can also help you consider employee benefits in your management plan and budgeting.
Learn more about FBT requirements here: Fringe benefits tax (FBT)
- Keep in mind that the scope of FBT is not always clear cut: Employers: Beware “left-field” FBT liabilities
FBT concessions and exemptions
Some employee benefits are exempt from FBT, or may receive concessional treatment. Read about concessions and exemptions here: FBT exemptions and concessions
- Small business employers should note the changes to FBT on electronic devices for the 2017 FBT year: FBT on portable electronic devices in 2017
We welcome you to speak to one of our taxation and business management advisers for further guidance on any of these issues.