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Reporting PAYG Withholding on BAS and IAS

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:

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 calculations, and PAYG figures required for BAS and IAS are automatically imported into QuickBooks after every pay run has been processed.

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

When PAYGW is enabled in Tax settings, QuickBooks will create a PAYG 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.

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.

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