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Intuit

Reporting PAYG Withholding on BAS and IAS

Please Note: In March 2018 QuickBooks will start rolling out a new GST experience. This will happen gradually over a period of time. If you can see the View reports menu when you are on the GST centre main page, you are in the classic experience, and if you can see Run Reports menu, you are on the new experience.

What is PAYGW (Pay-as-you-go-withholding)

As an employer, small business owners have a role to play in helping your payees meet their end-of-year tax liabilities. They do this by collecting pay as you go (PAYG) withholding amounts from payments they make to:

  • your employees
  • other workers, such as contractors, that you have voluntary agreements with
  • businesses that don't quote their Australian business number (ABN).

PAYG withholding for employees is at the national level, and is different than payroll tax, which is a state levied tax.

PAYG is normally reported and paid to the ATO on a quarterly (BAS) or monthly (IAS) basis, the frequency of which is determined by the amount of wages paid to your employees annually. For more information about PAYG withholding tax obligations, please consult a payroll tax professional and/or explore the ATO website links below: https://www.ato.gov.au/Business/PAYG-withholding/ https://www.ato.gov.au/business/payg-withholding/paying-and-reporting-withheld-amounts/

Entering Payroll data into Quickbooks

PAYG for BAS and IAS reporting can be entered in QuickBooks in 2 ways:

  • Automatic import or manual entry using BAS-W1 and BAS-W2 tax codes
  • Manual entry directly into the PAYGW stage (Updated only)

QuickBooks has partnered with KeyPay for payroll processing and calculation, and PAYG figures required for BAS and IAS are automatically imported into QuickBooks after every payrun has been processed. Data entry for PAYGW will be slightly different if you are on the Classic or Updated experience, with special instructions for businesses with monthly PAYG and quarterly GST obligations. For more information about how and when you can update your Classic GST experience, please visit GST Centre Update FAQs

Automatic import or manual entry using BAS-W1 and BAS-W2

After a pay-run has been finalised in the Employees tab, Keypay automatically posts a journal entry back to QuickBooks, which the GST centre will pick up for processing BAS or IAS. If your payroll is processed outside of QuickBooks, PAYG figures are entered manually into QuickBooks via a journal entry. In either method, figures for Total salary, wages and other payments and Amount withheld from payments shown at W1 under PAYG tax withheld are imported into the GST using BAS-W1 and BAS-W2 tax codes. As an example, a simple payrun journal will include:

  • DR to Wage Expense
  • DR to Superannuation Expense
  • CR to Payroll Clearing
  • CR to PAYG Withholdings Payable
  • CR to Superannuation Payable

The Wage Expense line will need to have a GST code of BAS-W1 for Total salary, wages and other payments, and the PAYG Withholdings Payable line will need have a GST code of BAS-W2 for Amount withheld from payments shown at W1, which will then show within your BAS automatically.

Lodging BAS with PAYGW

PAYG figures will automatically flow into the Prepare BAS or IAS screens of QuickBooks based on BAS-W1 and BAS-W2 tax coding, however the lodgement experience is very different depending on whether you are on the classic or updated GST experience in QuickBooks.

Classic GST centre

In the classic GST centre, QuickBooks only supports the Business Activity Statement (BAS) for a single filing period (monthly, quarterly or annually). When reporting PAYGW, the Prepare BAS screen will automatically pick up Total salary, wages and other payments and  Amount withheld from payments shown at W1 based on BAS-W1 and BAS-W2 tax code usage. If you have an Amount withheld where no ABN is quoted, or  Other amounts withheld, input the figures on lines W4 and W3, and add up the total amounts withheld for line W5 Total amounts withheld. With your W5 figure, you will need to record an adjustment on line 4 PAYG tax withheld under Amounts you owe the tax office to report the full amount of PAYGE withholding being reported on your BAS. When you mark as lodged, you will still need to lodge your BAS with the ATO via your paper statement or myGov portal.

New GST centre

In the updated GST centre, when Tax withheld for employees (PAYGW) is enabled in Tax settings, QuickBooks will create a Payroll Withholdings Payable account, enables BAS-W1 and BAS-W2 tax codes, and enables the IAS or BAS Lodgement. The reporting frequency determines whether PAYGW will be reported on IAS (no GST) or BAS (alongside GST). To include PAYG on your BAS lodgement, make sure your reporting frequency is set to the same reporting frequency as GST in Tax Settings. After clicking the Prepare IAS or Prepare BAS button, if PAYGW is due QuickBooks will include a PAYGW stage within the lodgement flow. Total salary, wages and other payments as well as PAYG withholding amount figures will calculate based on the period and journal entries using BAS-W1 and BAS-W2 tax codes.

Tick the I have other PAYG withholding to report box if you need to report Amounts withheld with no ABN or Any other amounts you withheld and click the green Next button when you are done. In the Instalment or Business Activity Statement Summary you will then see all lines related to PAYGW are calculated automatically and ready to mark as lodged.

Reporting PAYGW monthly (IAS) and GST quarterly (BAS) in QuickBooks

If your business pays employee taxes of more than $25,000 per year, are likely required to report and pay PAYGW on a monthly basis, but likely report and pay GST on a quarterly basis. For this to be reported correctly to the ATO, you will report only total salaries paid and payroll withheld each month via an Instalment Activity Statement (IAS), and then when you lodge your Business Activity Statement (BAS) for the quarter you will only include payroll amounts from the final month.

Please note the way this is handled by QuickBooks depends on if you are on the classic or updated GST Centre. If you can see the View reports menu when you are on the GST centre main page, you are in the classic experience, and if you can see Run Reports menu, you are on the updated experience.

Classic GST centre

In the classic GST centre, QuickBooks only supports the Business Activity Statement (BAS) for a single filing period (monthly, quarterly or annually). Because of this, there is no lodgement available for the Instalment Activity Statement (IAS), which is used for reporting PAYGW, PAYGI and FBT tax obligations on a monthly basis.

Inside the Prepare BAS screen, change the date range at the top for each month in order to determine total wages paid and PAYGW withheld, and then lodge your IAS with the ATO as you normally do outside of QuickBooks.

You will then need to then manually delete the BAS-W1 and BAS-W2 tax codes inside your payrun journals for the first two months of each quarter to ensure your quarterly BAS only reports payroll amounts only for the final month. This will ensure that when you record an adjustment on line 4 under Amounts you owe the tax office you will only report and pay PAYG for only the third month of the quarter.

To record tax payments made to the ATO for IAS, you can either create an expense for payment and take it directly out of the account it is in (ie PAYG payable) or journal it to your BAS Suspense account so you have a running balance of the GST & PAYG that will match your integrated client account with the ATO.

New GST centre

In the Updated GST centre, Quickbooks natively supports multiple filing frequencies for monthly and quarterly obligations based on your tax setup, including IAS and BAS. To enable PAYGW monthly (IAS) reporting, in Tax settings simply tick the Tax withheld for employees (PAYGW) box and set your reporting frequency to monthly.

When PAYG monthly reporting is enabled, the first two months of each quarter will display a Prepare IAS button under the To lodge section of the GST dashboard. QuickBooks will automatically import PAYGW figures from your payroll journals just for that month, and you can mark as lodged and even apply a tax payment against your IAS lodgements. After you have lodged IAS for months one and 2 of the quarter, the Prepare BAS option will be available. When making your BAS lodgement, QuickBooks will automatically look at GST for the entire quarter, but PAYGW figures for the final month only.