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PAYG Payment Summaries: How to prepare and submit them in Australia

04/04/2023 by
The Marketing Team
If you are an employer in Australia, it is absolutely necessary that you understand the process of preparing and submitting PAYG (Pay As You Go) payment summaries. PAYG payment summaries are an essential document for your employees to lodge their tax returns. These summaries include information about the total amount of payments made to an […]
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If you are an employer in Australia, it is absolutely necessary that you understand the process of preparing and submitting PAYG (Pay As You Go) payment summaries. PAYG payment summaries are an essential document for your employees to lodge their tax returns. These summaries include information about the total amount of payments made to an employee during the financial year, the amount of tax withheld, and any superannuation contributions made. The purpose of this Business Kitz article is to provide a comprehensive guide on PAYG payment summaries, including what they are and how to prepare and submit them.

What are PAYG payment summaries?

A PAYG payment summary, also known as a Group Certificate, is a document that shows the total amount of payments made to an employee during the financial year, including salary, wages, bonuses, and allowances. The document also shows the total amount of tax withheld from these payments, as well as any superannuation contributions made by the employer on behalf of the employee.

Having access to PAYG payment summaries are essential for employees to complete their tax returns accurately. They need to declare all their income, including their salary or wages, in their tax return. The ATO uses the information provided in the payment summary to calculate an employee's tax liability or any tax refunds they may be entitled to.

Employers are required to provide their employees with a PAYG payment summary no later than 14 July each year. Failure to do so can result in fines and penalties.

Preparing a PAYG payment summary:

To prepare a PAYG payment summary, employers need to ensure that their records of payments made to employees are accurate and up to date. This includes ensuring that all payroll records are complete, including details of gross pay, tax withheld, and superannuation contributions.

The following steps listed below should be taken when preparing summaries:

1. Collect all relevant information:

Before you can prepare your payment summary, you need to collect all the relevant information. This includes:

  • Employee details: full name, address, and tax file number (TFN).
  • Employment details: dates of employment and salary information.
  • PAYG withholding: the amount of tax withheld from each payment made to the employee throughout the year.

2. Calculate the amount of tax withheld:

Once you have collected all the relevant information, you need to calculate the amount of tax withheld. This can be done using the ATO's tax withheld calculator, which takes into account the employee's salary, tax-free threshold, and any other deductions or offsets.

3. Complete the payment summary:

Once you have calculated the amount of tax withheld, you can complete the payment summary. This can be done using the ATO's PAYG payment summary - individual non-business form, which can be downloaded from their website.

The payment summary must include the following information:

  • The employee's name and address.
  • The employer's name and address.
  • The employee's TFN.
  • The total amount of salary or wages paid to the employee.
  • The total amount of tax withheld.
  • Any other payments made to the employee, such as bonuses or allowances.
  • Any reportable fringe benefits provided to the employee.

It is important to note that from 1 July 2019, Single Touch Payroll (STP) became mandatory for employers with 20 or more employees. STP is an ATO initiative that requires employers to report their employees' payroll information directly to the ATO through their payroll software each time they pay their employees.

However, for employers with 19 or fewer employees, payment summaries are still required to be prepared and submitted to the ATO.

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Submitting a PAYG Payment Summary:

Once the payment summary has been completed, employers need to ensure that a copy is provided to their employees no later than 14 July each year. They must also lodge a copy of the payment summary with the ATO by 14 August each year. There are a few different ways that payment summaries can be submitted:

1. Paper Submission:

If you are submitting fewer than 50 payment summaries, you can submit them in paper form. You will need to fill out the PAYG payment summary - individual non-business form and mail it to the ATO.

2. Electronic Submission:

If you are submitting more than 50 payment summaries, you must submit them electronically. This can be done using the ATO's Business Portal or through a third-party software provider.

3. Single Touch Payroll:

Since July 1, 2018, employers with 20 or more employees have been required to use STP to report their employees' tax and super information to the ATO. Under STP, payment summaries are no longer required to be submitted separately, as the information is reported in real-time throughout the year.

Key takeaways

PAYG payment summaries are an essential part of the Australian tax system, and it is important for both employers and employees to understand their obligations when it comes to preparing and submitting them. By accurately preparing and submitting payment summaries, you can ensure that your tax obligations are met and avoid penalties for non-compliance. If you're unsure about how to prepare and submit your payment summaries, seek advice from a qualified accountant or bookkeeper, or refer to the resources provided by the ATO or Fair Work Australia.

Legal Advice

Managing a business can be tricky and exhausting, but we are here to make it easier. Check out our Business Kitz Subscription Service today to access our full range of legal, commercial and employment documents to begin your business with a solid foundation that ensures compliance. If you are unsure about how to best protect yourself and your future business, our sister company, Legal Kitz can assist you. Additionally, you can request a FREE consultation with one of their highly experienced solicitors here today, or contact them at info@legalkitz.com.au or 1300 988 954.

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The Marketing Team
Business Kitz Marketing team are experts in their field. You can expect the best business guides and updates on employment law here.
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