ATO Payroll process Updates
After a shaky year due to the pandemic causing a full scale economic catastrophe globally, the Australian Government is slowly making the necessary adjustments to follow suit. These updates will reflect on processes applicable to tax cuts.
Starting this month on the 6th October 2020, the Australian Government ATO has introduced personal income tax cuts as part of the 2020-21 budget adjustments. The new income tax cut adjustments will bring forward the legislative personal income tax cuts from the 1st July 2022 to the 1st July 2020.
All Australian employers and employees can refer to the 2020-21 updated tax tables downloadable at https://www.ato.gov.au/Rates/Tax-tables which will give the right schedule and amount of tax withholdable for employee payments from their next pay cycle.
All employers will now be required to make these adjustments to their payroll systems and processes in order for all tax cuts to be reflected in the final take home wages for all employees.
Note: For all bookkeepers on the ATO payroll process updates
All businesses must ensure that the correct withholding amount for employees salary or wages paid for all processed payruns is updated and correct in their systems by the 16th November onwards.
Some employees will start to notice the tax cut amends in their take home pay within a few days or weeks while It may take longer for others. There is a certain level of complexity in implementing these adjustments and results can differ from one business to another.
All businesses do not need to make any further adjustments or refunds to their employees. Any over- withholding that has occurred prior to these updates to the payroll system and processes will be applied as credits for when the employees are required to lodge their 2020-21 income tax returns.
ATO is committed to supporting all businesses through this change and is also working closely with all Payroll software providers as they work towards updating their software by the 16th November 2020 to reflect the reduced withholding that is associated with the income tax threshold changes. Stay tuned for these changes and updates to happen.
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