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Payroll Records
Payroll

A Business Guide To Payroll Records

As a business owner, you are legally required to maintain payroll records. The best way to ensure you follow all relevant record-keeping regulations is to understand what records are, what you need them for, and for how long to keep them.

If you're unsure whether a specific document should be maintained, you can reach out to a registered tax agent for further clarification. There are financial and legal consequences for non-compliance.

How Long Should You Keep Payroll Records In Australia

Australian payroll records should be retained for seven years, whether or not the employee leaves the business. The purpose of record-keeping is to protect employee rights and provide you with a record of any relevant payroll transactions in the case of an audit. These records contain information that payroll staff require to calculate gross and net pay for employees. 

This typically includes information about:

  • Bonuses
  • Commissions
  • Bereavement pay
  • Hours worked
  • Gross wages and net wages paid
  • Information about deductions, benefits, garnishments, pensions, charitable contributions, or stock purchase plans
  • Superannuation information
  • Records on sick pay and holiday pay
  • Employee salary rates
  • Manual check payments, and direct deposit authorisation forms

As part of an audit, a Fair Work Inspector can visit your premises and request these records, which means they need to be readily accessible in English, and legible. If you do not correctly maintain records, you may be issued a fine. 

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Documents And Information To Retain 

Your records cannot be altered unless it is to correct errors. They cannot be misleading or false. Having a best practice or policy in place for keeping records will make tracking details much simpler. It will also make it easier to identify payroll issues. 

You should keep the following records: 

General Records 

  • Employee name (and employer name)
  • Employer ABN
  • Commencement date of employee’s contract
  • Employee's contract – casual, part-time or full-time
  • Employee's contract – temporary or permanent

Payroll Records 

  • The employee's pay rate
  • Gross and net pay
  • Deductions from gross pay
  • Details of bonuses, penalty rates, loading, or allowances
  • Details regarding incentive-based payments
  • The guarantee of annual earnings along with the date of any revocation of the guarantee (where applicable)

Hours of Work 

  • Loadings or penalty rates paid for overtime hours, including the number of overtime hours worked and when these hours started and finished.
  • The hours worked if employees are casual and paid based on the time they work.
  • A copy of the employee's signed contract if they agreed to average their work hours. 

Leave 

  • All leave taken (such as annual leave, sick leave, or personal leave)
  • How much leave is remaining

If you allow employees to cash out their annual leave, you will also need to keep a copy of the agreement to do so. You will need a record of how much leave was used, how much was paid and when you made the payment. 

Superannuation 

  • The amount paid
  • The date paid and the pay period
  • The name of the super fund
  • The employer's reason for paying into the fund

Employment Termination 

  • You must retain information about how the employment ended, whether it was a resignation, summary dismissal, or otherwise.
  • If the employee handed in their notice, it needs to be added to their file.
  • The record should reflect the name of the individual who terminated the employment.

All of the above records are relevant to small businesses. These are records that every registered business with employees should have. 

ATO And Fair Work Record-keeping Regulations 

Fair Work and the Australian Tax Office (ATO) have set out the rules governing which records should be kept and how long they should be kept. 

We have included some of these below, but you can refer directly to the Fair Work website for more information

  • Keep detailed records concerning the starting, operation, changing, selling, or shutdown of your business. Also have clear documentation to differentiate between business and personal use expenses. 
  • You cannot alter information in your records unless it's to correct information. You need to store your records safely to prevent damage. An inspector can ask to see the safeguards you have put into place. 
  • Most tax and super-related transaction records need to be kept for five years. The five year period usually starts when you prepare or obtain the record, or complete the transaction that the record relates to. There are situations where the start of the five-year period may be different such as:
  • Fringe Benefits Tax (FBT) - the five-year period starts from the date you lodge your FBT return
  • Records for super contributions for your employees – The five-year period starts from the day of the contribution
  • Records that show your super fund choice for your employees – the five-year period starts from the date the employee has been engaged with the super fund, or when the employee chooses to change their choice of super fund. 
  • You need to produce your records when an inspector requests them. 
  • Your records must be in English or be able to be easily converted to English.

The Benefits Of Maintaining Accurate Records 

  • Complete records allow you to track the health of your business.
  • Complete records can guide you to make sound business decisions.
  • You can keep track of the money owed to you and the money you owe.
  • You can monitor cash flow.
  • Records can demonstrate your financial position to prospective buyers, lenders, and tax professionals.
  • Complete records can ensure you remain legal and compliant, making any audit processes simpler.

QuickBooks Payroll powered by Employment Hero makes record-keeping safe and compliant. Let QuickBooks take the number crunching out of the process, leaving your payroll administrator to oversee everything. Tax deductions will all be worked out for you. QuickBooks Payroll can also track absences, expenses, bonuses, holiday pay, overtime, super and (of course) hourly pay or salaries. And with the advent of open banking, payments are faster than ever (and more secure).


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