Running a business can mean a lot of paperwork; especially since “paperwork” may not always mean physical files. Being overwhelmed with documents and reports may make you yearn for one less reason to create something else, but your PAYG payment summaries should never be the one you neglect. This is so even if you are not required to withhold taxes, and here is why.
What is a PAYG Statement?
There are two PAYG (Pay As You Go) tax topics to understand: 1) PAYG installments (or PAYGI) which are the tax installment payments you make to the ATO; and 2) PAYG withholding (or PAYGW) which is the tax you collect from your workers, employees or relevant payees. The rules under PAYGW require you to provide a payment summary to said individuals/payees showing the payments made and the amounts withheld throughout the financial year.
Why it is Important to Your Business
Giving PAYG payment summaries is recommended for a number of reasons. These range from proper organization to having proof if necessary and being able to easily track someone’s salary. Here are some points to note:
These summaries provide detailed accounting information
PAYG payment summaries give very specific information about each payee. Important tax numbers are included, salary and earnings are noted, and tax liabilities are defined. This means each payee has all the relevant details needed for their own purpose and you will also have this information at your fingertips to use whenever you need it.
It makes filing taxes easier
These payment summaries will make it easier for you to file taxes because the calculations are already done. Plus, you are also less likely to overlook withholding the necessary taxes if you have to give an account of them later on. Additionally, you are far more likely to pay attention to keeping your accounting and employee information organized since you will have it.
Generating reports will be faster and simpler
Having the PAYG information sorted is only a part of the equation, but it does lend to greater efficiency when it comes to running reports, doing financial reviews, or looking at certain types of expenditure. Additionally, it makes it easy to examine the earnings of a specific payee in order to spot discrepancies.
It is your proof and/or clarification
Giving payment summaries to your payees allows them to query under or overpayments immediately. In fact, payment summaries could serve as proof if you need to refute a claim. Next, they are detailed so they remove any doubt a payee may have about why a deduction was made and they help if you are being audited.
Besides the above, PAYG payment summaries further improve efficiency because they reduce requests from payees for accounting records. In fact, many financial transactions require some proof of income and these readily available summaries can minimize the time you spend providing the data to individuals. Lastly, they have several benefits for bookkeepers and accountants who may have to look back over your accounting transactions, and your tax agent is likely to have several uses for these.