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Payroll

What is a PAYG Payment Summary?

By QuickBooks Australia

May 22, 2024

A PAYG payment summary is a statement detailing how much each employee was paid and the amount of PAYG withholding. A PAYG payment summary used to be a key requirement for employers at the end of each financial year.

Today, the PAYG payment summary method has been replaced by Single Touch Payroll (STP) reporting. The Australian Taxation Office (ATO) has created an online service to allow employers to submit PAYG payment summary statements electronically. If entered correctly, all payroll transactions will be automatically captured in the PAYG payment summary.

STP automatically reports payroll details such as salaries and wages, PAYG withholding, and superannuation, to the ATO after each pay period. At the end of the financial year, you can review all payroll information before submitting it to the ATO. But keep in mind that You need to provide your employees with a PAYG payment summary by 14 July, even if no PAYG was withheld.

You can send the PAYG payment summary to the ATO via an EMPDUPE file or using their online service. Some accountants will also advise that you work with a qualified tax agent to complete your annual tax return to ensure you are legally compliant.

You shouldn't use the PAYG Payment summary method unless the ATO has given you the approval to use it instead of STP.

PAYG Payment Summary Process

A PAYG payment summary highlights how much the employee was paid during the financial year and how much was withheld. In the event that an employee was terminated, an employer has 14 days from the final payment date to provide the employee with a PAYG payment summary.

Before you start the PAYG payment summary process, there are certain checks you should complete:

Ensure all of your employees’ payments for the financial year have been completed.
Review the payroll summary report for the year to ensure it is aligned with what the ATO received via your Business Activity Statements (BAS).
Ensure all of your employees' personal information and details are current. You can update them if necessary.
If an employee has left the business, you need to ensure there is a termination date in the employee’s details.
Ensure your business details are current and accurate.

Verify employer details by:

Ensuring the organisation and trading names are accurate
Checking that the ABN is valid
If you have more than one branch, each one should have its own individual branch number to go with the ABN. If there is only one branch, the ABN branch number defaults to 1.
Ensuring you provide a valid email address as contact information.
Providing the business's physical address.

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Part of this process requires you to provide a payer contact, who is the person that prepares payment summaries. They will serve as the point of contact for the ATO should there be any queries.

You also need to verify employee details such as their name, TFN, home address, and any reportable fringe benefits amounts.

Once you review the above, you can then check each summary individually and provide a printed copy to your employees. Each form must be signed by an authorised person once verified. You can either create an EMPDUDE file and send it to the ATO using their online service, or ask your accounting advisor to lodge it for you.

Deductions to exclude in your PAYG Payment Summary

There are deductions you should exclude from your PAYG payment summary. For example, if you reported an amount and finalised it through STP, you do not need to provide this information on a payment summary. However, any payments not reported through STP must be included in the payment summary income statements.

Certain deductions are excluded from the reportable gross payments in your employee's payment summary, such as car lease and transportation expenses. It is advisable to consult your tax agent to ensure all expenses are captured. You will find a section called ‘Other Pay Types’ when you add a payroll transaction. You can use this section to add non-deductibles to your PAYG payment summary.

Streamline your PAYG payment summary

A PAYG Payment Summary is created within your payroll system. With the help of QuickBooks cloud payroll software powered by Employment Hero, you can rest assured that your PAYG payment summary is accurate and compliant with the law. Book a free payroll setup session today.

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