You may have tax and superannuation obligations if you employ or contract workers into your business, either full-time or part-time. This includes your family members and you, if you are a director. Your obligations may include:
- pay as you go (PAYG) withholding
- superannuation guarantee
- fringe benefits tax (FBT).
You have responsibilities from the day your employee (or contractor) starts working for you to the day they stop. You also have some responsibilities if you stop being an employer altogether.
Preparing to engage workers
If your business is about to engage workers (either employees or contractors) for the first time, you will need to know how to set up the necessary taxation and superannuation arrangements.
When a worker starts work you will need to: determine whether they are an employee or contractor if you have not already done so, provide employees with a Tax file number declaration (NAT 3092) and, if applicable, a Withholding declaration (NAT 3093), which they must complete and return to you, provide a Standard choice form to employees who are eligible to choose a super fund and discuss with the worker if a voluntary agreement arrangement is appropriate.
On payday you will need to determine the rate of tax that you need to withhold from payments you make. While your super guarantee and fringe benefits tax payments are not linked to your workers’ payday, you need to understand these payments, record keeping and reporting obligations and plan to meet them.
Payments and reporting
Most reporting and payment responsibilities occur when you complete and lodge your activity statement, usually
monthly or quarterly. An annual report and a balancing payment (or refund) may be required. Superannuation payments are required at least quarterly.
When an employee or contractor stops working for you, you’ll have final reporting and payment obligations. If they are eligible for an employment termination payment (ETP), you will have additional PAYG withholding obligations.
No longer an employer
Once you stop engaging workers, you need to ensure you have met all your final payment and reporting obligations. You also need to cancel your PAYG withholding registration.
Keeping employment and contractor records is an essential part of running your business and helps you to claim all your deductions. You must keep your records in an accessible form (either printed or electronic) for five years.
Working out if you have to pay super
You must make super contributions for an employee if you're considered an employer for super guarantee purposes and your employee is entitled to the super guarantee.
Working out if you’re an employer for super guarantee purposes
You're an employer for super guarantee purposes if you employ a person under a verbal or written employment contract on a full-time, part-time or casual basis. You may also be considered an employer if you: make payments to a person for labour under a contract, even if the person quotes an ABN, are responsible for paying salary or wages and have legal control over the worker (such as the power to dismiss them).
You have specific responsibilities at every stage of your worker's engagement, from engaging your first employee or contractor through to ceasing to be an employer.