The quick answer
The set-up comes before the first pay, not after it. Registering for PAYG withholding is one part of that.
You take on tax, super and reporting for someone else. Each one has its own system and its own dates.
Pay and conditions come under a separate set of rules, generally an award or agreement and the National Employment Standards.
The harder part: setting everything up in the right order, so the first payday is correct.
It starts before the first pay
When you hire, you start withholding tax from wages, paying super and reporting each pay to the ATO through Single Touch Payroll. These are separate obligations, and each one needs to be in place before you pay anyone.
On the first of them, the ATO is clear:
“You must register before your first payment that is a payment you need to withhold from.”Australian Taxation Office, Before you hire your first worker
So the order matters. An employer who pays first and registers later is already behind.
The ATO is only part of it. Pay rates, pay slips and records come under the Fair Work system, and workers compensation insurance and payroll tax are handled by your state or territory.
Two businesses, one new worker each, different first year
Two business owners each take on their first worker in the same month. One has a smooth first year. The other spends it fixing late registrations, missed super and a pay rate that was too low.
The difference comes down to what was set up before the first pay, whether the worker was correctly treated as an employee, which award applied, and how the payroll was run.
Six questions to answer before the first pay
QUESTION 1
Is the person an employee or a contractor?
It depends on the working arrangement, and the answer changes what you have to do.
QUESTION 2
Are you registered for PAYG withholding?
Registration comes before the first payment you need to withhold from.
QUESTION 3
How will you pay super?
Super is now paid for each payday, and it needs to reach the correct fund on time.
QUESTION 4
How will you report each pay?
Employers report payroll through Single Touch Payroll, which generally means software that can do it.
QUESTION 5
Which award or agreement applies?
It sets the minimum pay and conditions, and it depends on the industry and the job.
QUESTION 6
What does your state or territory require?
Workers compensation insurance is arranged locally, and payroll tax may apply depending on your wages.
There is no single answer to any of these. Each one depends on your own situation. Working them out is what we do every day.
What getting it wrong can cost
Late registrations and late reports, which can lead to penalties.
The super guarantee charge, where super isn’t paid in full, on time and to the correct fund.
Back pay, where the wrong award or pay rate was used.
A worker paid as a contractor who was an employee, with tax and super to correct afterwards.
Does this sound like you?
I’m about to hire my first person.
I’ve already paid someone and haven’t registered for anything.
I’m not sure if they are an employee or a contractor.
I don’t have payroll software.
I don’t know what I need to lodge, or when.
I’m hiring a family member.
I’d rather have it set up properly from the start.
If even one of these is you, it’s worth a quick conversation. Sorting it out early is almost always easier than fixing it after the ATO gets in touch.
Common questions
I’m only hiring one casual. Do I still need all of this?
Generally, yes. The obligations apply because you are an employer, and not because of the size of your team. Some details are different for casual staff, and we go through those with you.
I’ve already started paying someone. Is it too late?
No. It can be put right, and it is better done now than after the ATO asks. We work out what should have been in place and bring it up to date.
Do I need payroll software?
Employers report each pay to the ATO through Single Touch Payroll, which generally needs software that can do it. We help you choose a set-up that suits the size of your business.
How much does it cost?
It depends on your situation, so we give you the fee before any work starts. Asking for a quote costs nothing.
