Author name: procloz

The year-end hustle can be overwhelming, especially when payroll deadlines are looming. One slip-up, and you could find yourself tangled in compliance woes or employee grievances. But don’t worry – this guide has you covered! From the 8 most common year-end payroll mistakes to a foolproof checklist, we’ll help you wrap up the year with confidence, accuracy, and a stress-free smile. Let’s dive in and make this year-end your smoothest one yet.

Mistakes to Avoid

#1 Failing to Reconcile Payroll Records

Reconciling payroll records ensures that all payments, deductions, and taxes are accurately recorded. Skipping this step can lead to mismatches between payroll and financial accounts, causing errors during audits. Regularly comparing payroll summaries with bank statements and tax filings can help identify and correct discrepancies early.

#2 Missing Tax Deadlines

Tax deadlines for year-end filings, are non-negotiable and carry severe penalties if missed. Delayed submissions can attract fines and complicate compliance audits. Keep a detailed calendar with all payroll tax due dates to avoid unnecessary stress and financial loss.

#3 Incorrect Employee Classification

Misclassifying employees as independent contractors or exempt staff can lead to unpaid taxes and legal disputes. Each classification comes with unique tax and benefit obligations that must be met. Review contracts and payroll records to ensure accurate classification and compliance with labour laws.

#4 Overlooking Year-End Bonuses in Tax Calculations

Year-end bonuses are considered supplemental wages and must be taxed appropriately. Failing to include them in tax calculations can result in underreported wages and penalties. Plan ahead by accounting for bonuses in payroll runs and withholding the correct tax amounts.

#5 Not Updating Employee Records

Incomplete or outdated employee records can lead to incorrect tax filings and payroll errors. Ensure that personal details, tax forms, and banking information are up-to-date before year-end processing. Regular updates minimize discrepancies and enhance payroll accuracy.

#6 Failing to Issue Correct Tax Forms

Failing to issue correct tax forms can have serious consequences for your business. Missing or incorrect details – like mismatched Social Security numbers, inaccurate earnings, or tax withholding errors – can lead to employee frustration and delayed refunds. Inaccuracies also increase the likelihood of compliance penalties, which can be costly and damage your reputation. To avoid these pitfalls, ensure all payroll  data is thoroughly reviewed before generating tax forms.

#7 Neglecting to Process Final Payments for Departing Employees

Departing employees must receive accurate and timely final payments, including unused leave and severance. Missing this can lead to legal claims and reputational damage. Ensure compliance by verifying state laws on final payment timelines and stay informed about obligations such as taxable benefits including Fringe Benefits Tax (FBT).

#8 Forgetting to Review Compliance Updates

Payroll laws and tax regulations often change annually, and missing updates can lead to compliance violations. Stay informed about new minimum wage rates, overtime rules, and tax brackets. Partnering with a payroll expert or using updated payroll software can keep you ahead of the curve.

Checklist to Follow

Review Employee Data

Before anything else, take a magnifying glass to your employee records. Ensure all information—names, addresses, tax IDs, and bank details is accurate. A small error here can snowball into major complications when filing taxes or issuing year-end documents like payslips and summaries.

Reconcile Payroll Records and Verify Tax Withholdings

Reconciliation is the unsung hero of year-end payroll. Match your payroll records with your accounting books to spot discrepancies. 

Ensure Payroll Tax Compliance

Compliance with payroll tax regulations is non-negotiable, especially during year-end. This ensures that your payroll aligns with the latest tax updates by applying new rates and rules as they’re released. Detailed payroll tax reports help you confirm compliance with federal, state, and local requirements.

Communicate with Employees

Your employees rely on you for clarity. Notify them about year-end schedules, cut-off dates for adjustments, and the timeline for receiving their documents. Transparent communication builds trust and reduces last-minute queries. By the same token, automation tools, local payroll services, and business process outsourcing services can transform a daunting task into a manageable one.

Prepare Year-End Reports and Plan for the Next Year

Year-end payroll reports are more than just compliance records—they’re a goldmine of financial insights. Review total payroll expenses, tax liabilities, and bonus allocations to inform your budgeting and strategic planning for the upcoming year. Use the insights gained to streamline processes, identify gaps, and refine your payroll strategy.

Takeaway

A well-managed year-end payroll is critical for compliance, financial clarity, and employee satisfaction. Procloz offers an integrated, technology-driven approach to payroll management, ensuring error-free processing for both Australian payroll and global payroll services. Whether it’s reconciling adjustments, or generating insights for strategic planning, Procloz enables businesses to offload complexities. With Procloz, you don’t just close out the year – you start the next one on a stronger, smoother foundation. Ready to transform year-end payroll chaos into clarity? Procloz is here to help.

Imagine a company offering its employees a luxury vehicle as a part of their remuneration package. While this attractive benefit can boost morale and enhance recruitment efforts, it also triggers the complexities of Fringe Benefits Tax (FBT) in Australia. As employers increasingly utilize non-cash benefits to create competitive advantages, understanding FBT is essential to avoid unexpected tax liabilities. This article will provide an overview of what employers need to know about FBT—covering its implications, reporting requirements, and strategies to minimize costs.

Understanding Fringe Benefits Tax

Fringe Benefits Tax (FBT), particularly in terms of payroll services in Australia, is a tax that employers are required to pay on specific benefits they provide to their employees, their employees’ family members, or other associates. This tax is distinct from income tax and is based on the taxable value of the benefits given.

As an employer, you are responsible for self-assessing your FBT liability for the financial year, which runs from 1 April to 31 March. If you have a liability, you must submit an FBT return and remit the amount owed. A fringe benefit represents a form of compensation to an employee that differs from traditional salary or wages.

Various types of fringe benefits exist, including:

• Allowing an employee to use a company vehicle for personal use
• Providing car parking facilities
• Covering an employee’s gym membership costs
• Offering complimentary tickets to entertainment events, such as concerts
• Reimbursing an employee for expenses like school fees
• Granting discounted loans
• Facilitating benefits through salary sacrifice arrangements with employees

Certain items are not classified as fringe benefits, including:

• Regular salary and wages
• Employer contributions to compliant superannuation funds
• Shares or rights offered under approved employee share acquisition schemes
• Termination payments, including gifting or selling a company vehicle to an employee upon termination at a discount
• Payments considered dividends under Division 7A
• Benefits provided to volunteers and contractors
• Exempt benefits, such as those given by religious organizations to their practitioners.

Remember, for employers managing Fringe Benefits Tax (FBT) in Australia, understanding the nuances of cross-border payroll tax compliance is also crucial, especially as differing regulations can significantly affect how employee benefits are provided and taxed in international operations.

Deadlines for Filing and Payment of FBT Returns

If you are responsible for preparing your own FBT return, you must submit it and settle any owed amounts by 21 May 2025. However, if a tax agent is handling your electronic submission, the deadline for both lodging and payment is 25 June 2025.

Who is Responsible for FBT?

The responsibility for paying FBT falls on the employer. This remains true even if a third party provides the benefit as part of an agreement with the employer.

Who Benefits from Fringe Benefits?

Fringe Benefits Tax (FBT) applies to the benefits given to your employees, as well as to their family members or associates. For the purposes of FBT, the term “employee” encompasses:

• Current, future, or former employees
• Company directors
• Trust beneficiaries who are involved in the business

If you are a sole trader or a partner in a partnership, you do not qualify as an employee, and any benefits you provide to yourself are exempt from FBT. Additionally, your clients are not considered employees, so any benefits offered to them, such as entertainment, are not subject to FBT.

Determining Your FBT Liability

To calculate the amount of FBT you owe, you need to “gross-up” the taxable value of the benefits you have provided. This grossed-up figure reflects the total income your employees would need to earn, at the highest marginal tax rate (including the Medicare levy), in order to purchase those benefits themselves. The FBT liability is then set at 47% of this grossed-up value of the fringe benefits.

What Are Your Responsibilities?

As an employer, your responsibilities include:

1.Identifying the various types of fringe benefits you offer.

2.Exploring available FBT concessions and opportunities to minimize your FBT obligations. Certain benefits, such as work-related items, may be exempt from FBT.

3.Consider alternatives to fringe benefits or providing benefits that qualify for concessions to lower your FBT liability.

4.If you operate as a not-for-profit organization, you might qualify for exemptions or rebates specifically for such entities.

5.Calculating the taxable value of the fringe benefits you provide.

6.Assessing your FBT liability.

7.Maintaining accurate records, including employee declarations where applicable.

8.Filing an FBT return and settling any outstanding FBT amounts.

9.Reporting the fringe benefits for each employee in their end-of-year payment summary, if required.

Strategies for Minimizing Your FBT Liability

• Substitute fringe benefits with cash salary.
• Offer benefits that employees can claim as an income tax deduction if they were to pay for them out of pocket.
• Consider providing benefits that are exempt from FBT.
• Implement employee contributions, such as having employees cover part of the operating costs for car fringe benefits (e.g., fuel) that you do not reimburse. However, be aware that these contributions may be regarded as assessable income for you and could be subject to GST.

Takeaway 

Understanding Fringe Benefits Tax (FBT) is essential for employers in Australia to navigate the complexities of employee remuneration effectively. By recognising the types of fringe benefits that trigger FBT, assessing their taxable values, and exploring strategies to minimize liabilities, employers can optimize their benefits packages while ensuring compliance with tax regulations. 
Need further assistance? Reach out to us. We offer Global Payroll services to help with accurate payroll tax calculations, multi-jurisdiction return filing, and identifying exemptions to lower tax liability. Gain access to Employer of Record services at Procloz that ensure compliance with local laws. Remember, staying informed about FBT concessions and exemptions, particularly for not-for-profit organizations, can further enhance financial management. As the landscape of employee benefits continues to evolve, a proactive approach to FBT will not only help maintain compliance but also contribute to a more engaged and satisfied workforce.

Think of the National Employment Standards (NES) as the rulebook for fair play in payroll. It’s not just about paying people – it’s about knowing when, how much, and for what. From annual leave to overtime, the NES has a hand in every paycheck, making sure employees get what they deserve. Wondering how this impacts payroll? This article will cover the essentials of the National Employment Standards (NES), exploring how they influence payroll processes, the key entitlements they establish, and the implications for employers. 

What is the role of the National Employment Standards (NES) and why are they significant?

In Australia, the National Employment Standards (NES) consist of 11 fundamental employment rights that all employees within the national workplace relations framework must receive. They serve as a safety net, alongside the national minimum wage, to safeguard workers in Australia.

These 11 core standards define the essential entitlements for employees, irrespective of whether they fall under a Modern Award, enterprise agreement, or individual employment contract. In essence, they represent the baseline conditions and essential rights of employment. The NES addresses various aspects of employment, including working hours, leave entitlements, flexible work arrangements, and termination.

That said, don’t overlook the global payroll challenges in Australia, including compliance with local regulations, managing diverse tax obligations, and navigating currency fluctuations. Similarly, noncompliance with the National Employment Standards can also lead to significant penalties for businesses and employers. 

By establishing these standards, the NES guarantees that employees benefit from fair and equitable working conditions, reasonable hours, and appropriate entitlements for their contributions. Be aware and adapt to change!

Key Features of the National Employment Standards

The National Employment Standards (NES) outline the minimum employment rights that must be afforded to all employees within the national workplace relations system, subjected to certain rules and exclusions. The NES includes the following minimum entitlements:

1. Maximum weekly hours: Employees can work up to 38 hours a week, added to reasonable additional hours.

2. Flexible working arrangements: Certain employees have the right to request changes to their working conditions.

3. Parental leave and related entitlements: Employees are entitled to up to 12 months of unpaid parental leave, with the option to request an additional 12 months. This also encompasses leave related to adoption.

4. Annual leave: Employees receive four weeks of paid leave each year, with some shift workers entitled to an extra week.

5. Sick and carer’s leave or compassionate leave: Employees are entitled to 10 days of paid sick and carer’s leave (pro rata for part-time employees), 2 days of unpaid carer’s leave as needed, and 2 days of compassionate leave as necessary.

6. Family and domestic violence leave: Employees can take 10 days of paid leave annually for situations involving family or domestic violence.

7. Community service leave: This includes unpaid leave for voluntary emergency activities and for serving on a jury, with up to 10 days of paid leave for jury service.

8. Long service leave: Employees who have been with the same employer for a long time are entitled to paid long service leave.

9. Public holidays: Employees receive a paid day off on public holidays (unpaid for casual employees), unless they are reasonably requested to work.

10. Superannuation: Employers must contribute to eligible employees’ superannuation funds according to super guarantee laws, which is also a NES entitlement (with some exceptions). For further details, please refer to the Tax and superannuation page.

11. Notice of termination and redundancy pay: Employees are entitled to up to five weeks’ notice of termination and up to 16 weeks’ redundancy pay, depending on their length of service.

12. Provision of the Fair Work Information Statement and the Casual Employment Information Statement: Employers must provide all new employees with the Fair Work Information Statement. Casual employees should also receive the Casual Employment Information Statement upon commencement and at specified times during their employment.

13. Employee choice regarding casual employment: There are pathways available for casual employees to transition into full-time or part-time roles under certain circumstances.

Are All Workers Entitled to the National Employment Standards?

The NES covers employees within the national workplace relations system, including those working under the Fair Work Act 2009, regardless of any Modern Award, enterprise agreement, or employment contract they may have. 

However, it’s worth noting that casual employees don’t receive the full range of NES entitlements. They are only eligible for specific provisions, including:

• Opportunities to request conversion from casual to permanent employment
• Unpaid carer’s leave
• Unpaid compassionate leave
• Unpaid family and domestic violence leave
• Unpaid community service leave

Impact of National Employment Standards (NES) on payroll

Standardization of Working Hours

Under the NES, as mentioned above, the maximum weekly hours of work are set at 38 hours, plus any reasonable additional hours. Payroll services in Australia must accurately track these hours to calculate standard pay, overtime, and ensure adherence to the maximum hour limit.

Example: If an employee works 45 hours in a week, payroll services must account for 7 hours as overtime, often subject to higher rates, as defined by the employee’s award or enterprise agreement.

Mandatory Leave Entitlements

The NES mandates specific leave entitlements, including annual leave, sick leave, parental leave, and domestic violence leave. Payroll departments must manage accruals, calculate paid leave, and handle unpaid leave in alignment with NES provisions. 

Example: A full-time employee is entitled to 4 weeks of paid annual leave annually. Payroll software needs to automatically calculate these entitlements based on hours worked and update balances after each leave.

Parental and Family Leave Provisions

Employees can take up to 12 months of unpaid parental leave, with an option to request an additional 12 months. Payroll must manage these periods, ensuring entitlements are paused and updated accordingly, and may need to adjust superannuation contributions if applicable. 

Example: A new parent opts for 9 months of unpaid parental leave. Payroll must suspend regular payments but keep their employment status intact for compliance and record-keeping purposes.

Compulsory Notice and Redundancy Pay

The NES outlines specific notice periods and redundancy payments based on the length of service. Payroll teams must calculate these correctly to avoid legal risks and ensure fair treatment of departing employees. 

Example: An employee with over five years of service is made redundant. Payroll must calculate redundancy pay according to NES guidelines, which may include up to 16 weeks of pay depending on service duration.

Flexible Working Requests

Eligible employees have the right to request flexible working arrangements. Payroll must align with these arrangements, adjusting pay calculations and work schedules accordingly. 

Example: A part-time employee requests to work remotely three days a week. Payroll must update time-tracking and payment systems to reflect their new work schedule.

Superannuation Requirements

Employers are required to make superannuation contributions in line with NES standards. Payroll departments must ensure contributions are correctly calculated and paid into eligible employees’ superannuation funds to meet compliance. 

Example: An employee earning $50,000 per year would require a superannuation contribution at the current rate (e.g., 11%) into their super fund, which payroll processes automatically with each pay cycle.

Fair Work Information Statement Compliance

Employers are required to provide each new employee with a Fair Work Information Statement, and casual employees with a Casual Employment Information Statement. Payroll or HR teams must ensure these documents are distributed to comply with NES. 

Example: Upon hiring a casual employee, payroll ensures the Fair Work and Casual Employment Information Statements are issued, keeping digital or signed records as proof of compliance.

Takeaway

From setting work hours and managing leave to arranging flexible work options, the NES ensures workplace protections for you and your team. So, pay close attention to the employment status of each team member, whether temporary or permanent, and create a clear, concise employment contract for everyone. It’ll be appreciated across the board!

Wondering about the latest updates in employment law for 2024? Choose Procloz. We offer Global Payroll services to help with accurate payroll tax calculations, multi-jurisdiction return filing, and identifying exemptions to lower tax liability. Gain access to Employer of Record services that also ensure compliance with local laws. We’re here reach out!