Tax Basics for Your Business - Employer Obligations (Australia)

What are my obligations as an employer?

1. Tax File Number (TFN) declaration form
When you hire a new employee, you have to provide them with a TFN declaration form to complete. You can order this form by calling the Small business info line on 13 28 66.

The employee has 28 days to return a completed TFN declaration form to you. After 28 days if an employee has not provided you with a TFN, or an exemption for quoting a TFN, you must withhold 48.5% from their pay if the employee is a resident and 47%, if the employee is a non-resident.

Once you receive the completed TFN declaration from the employee, you have 14 days to countersign it, send the original copy to the Tax Office and retain the copy for your own records.


2. Pay as you go withholding (PAYGW)


When you employ people, you have to withhold an amount from their wages (withholding tax) and report it on your Business Activity Statement (BAS) at labels W1 and W2. To be able to report these amounts you need to register for PAYGW first. If you want to find out more about how to register for PAYGW, please read our article about registration.

The amount you withhold must be in accordance with the Tax Tables published by the Tax Office. You can download these tax tables from the ATO website www.ato.gov.au or you can order them by calling 13 28 66.

You have to report the amount you withhold at labels W1 and W2.

W1 - Include here gross payments. These payments could include:


• Payments to employees, for example salary, wages, allowances and bonuses;
• And, eligible termination payments and superannuation type payments such as pensions or annuities;
• And, compensation, sickness and accident payments in respect of incapacity for work which you pay regularly or periodically
• And, payments you made under a voluntary agreement;



Do not include:


• Superannuation contributions;
• Or, amounts subject to salary sacrifice arrangements;
• Or, payments from which an amount was withheld because an ABN was not quoted (report this at W4);


W2 - Include here the total amount withheld from salaries, wages and other payments shown at W1. If the amount you withhold annually is less than $25,000, you need to report PAYGW on your BAS quarterly.

If the amount you withhold annually is more than $25,000, you need to report PAYGW on your BAS monthly.


3. Payment summaries


You need to give a payment summary to all your employees by 14 July each year.


4. PAYGW annual report


Every year you need to complete a PAYGW annual report and send it to the Tax Office by 14 August each year. The report should consist of a completed original PAYG payment summary statement- yellow copy (you can order one by calling 13 28 66) and the Tax Office original copy of all payment summaries you have issued to your employees.