Understanding Payment Summaries in Australia
The Australian Tax Office (ATO) mandates all businesses in Australia provide a detailed annual report about employee earnings. This is known as a Payment Summary. It is also often referred to as a PAYG summary annual report.
ATO regulations require businesses to report annual earnings in the form of a payment summary. This is completed electronically, and usually, employers will provide their employees with a paper or electronic copy.
The easiest way to think of a payment summary is as an additional payslip that covers the entire year. If you report payments through Single Touch Payroll (STP), you do not need to produce payment summaries. However, if you make payments that do not get reported through STP, you will need to provide the ATO with payment summaries and issue the relevant employees with a copy.
There are different types of payment summaries for regular earnings. As an employer, you also need to produce foreign employment payment summaries if you employ Australian residents to work on foreign assignments or projects that are taxable.
There are also Employment Termination Payment (ETP) summaries to consider. An ETP is a lump sum payment made as a result of the termination of a person's employment.
If an employee has been terminated during the reporting year, you need to produce the relevant payment summary. This will detail the lump sum employee termination payment they received when they were terminated. Our QuickBooks Payroll solution - powered by Employment Hero includes an ETP summary with the information found in the employee history table.
Employee history tables are updated every payroll cycle. While you can choose to report this information manually for ATO online services, your payroll should allow you to do so electronically without any hassle. You must report every ETP payment summary to the ATO. The ETP cap for the current year is $230,000 and this is the maximum value an individual can receive at concessional tax rates.
