At the beginning of October the Australian Government handed down its 2020 Federal Budget. Part of the Government’s response to the COVID-19 pandemic is to cut personal tax rates retrospectively from 1 July 2020. The Government estimates this will provide tax relief of approximately $12.5 billion over the next 12 months.
To ensure these tax cuts are effective now rather than at tax time 2021, the tax tables used to calculate PAYG to be withheld on wages have been updated to reflect the tax cuts. The effect is that employees end up with more money in their pays each period.
Employers have until 16 November to implement the new tax rates for their employees. So, what do employers need to do?
XERO and MYOB Essentials
Nothing needs to be done by XERO and MYOB Essentials payroll users, the software has been automatically updated with the new tax rates.
MYOB announced last week that their tax tables have been updated for the new tax rates.
If you are using AccountRight 2020.3 this is nothing you need to do. This version updates the tax rates automatically.
If you are using AccountRight 2020.2 or earlier, you must upgrade your software to AccountRight 2020.3 before 16 November to comply with the new tax rates.
Software updates can be initiated from the in-product messaging (usually a yellow banner across the top of the screen) or by logging into your my.myob.com account.
Other Payroll Software
Check in with your software provider to confirm what actions are required.
Manual tax tables
The Tax Office has updated the tax tables on their website for the changes. Copies of the new tax tables can be accessed at ato.gov.au/rates/tax-tables/
If you have regular transfers set up to automatically pay employees, now is a good time to review these to ensure the wage payments being made are in line with the net tax rates.