An inevitable part of running a business is paying your employees salaries, commissions, bonuses, wages, and superannuation. But did you know these can be tax-deductive if you comply with ATO’s rules and regulations?
This guide details vital information business owners must know regarding claiming employee salaries and wage deductions.
Claiming Salaries and Wages
The deductions you claim depend on your business structure. Let’s take a look at the various types of business operations and if they are eligible for claiming tax deductions;
- Sole trader: As you own your business, you won’t pay yourself a set salary, and any wage you set aside for yourself is classed as a distribution of profit.
- Business partnership: Again, being a business partner means you won’t have a salary, and any wage for yourself is classed as a profit distribution.
- Company or trust: In this structure, you can generally claim a deduction for any salaries and wages paid to you or other workers.
Super Contributions for Business Workers
You can claim a deduction for super contributions made on time to a complying super fund or retirement savings account for your employees and certain contractors. This amount is only tax deductible if paid in full and on time.
As an employer, you’re legally required to pay super contributions at the rate of 10.5%, no matter how many hours your employees work or their wage (can differ for those under 18s working less than 30 hours).
What is PAYG Withholding?
PAYG withholding is a tax collection system through employee earnings for the ATO. Employers must withhold a portion of their employees’ wages or salaries to cover their expected income tax liability for the year.
What Are Personal Super Contributions?
Running a business is challenging, with many obligations you must consider at every step. Expanding your business, managing finances, and fulfilling your obligations as an employer are just some of the responsibilities entrusted to you.
During all this, it’s also essential to prioritize your future retirement plans and take the necessary actions to fulfil them. Hence, contributing to superannuation is vital to help plan a secure future and positively impact your life after retirement.
The best way to manage your business finances and assess superannuation is to seek advice from a qualified expert that can offer you guidance. YBM has certified and qualified advisors who can specifically advise on superannuation contributions and all associated implications. Contact us today to receive support.