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An article published by BDO Australia discusses the importance of reviewing payroll provider services with a particular focus on tax obligations.

The article states that where a business employs staff, that business has the obligation to ensure the tax withheld from employees’ wages is remitted to the Australian Taxation Office (ATO). Under some arrangements payroll providers will be paid the gross wages by the employer and then arrange payment of the net wages to the employee and the withholding tax to the ATO.

It goes on to advise that it is important to note that where a business use such a service, the employer should be aware that paying these amounts to the service provider does not meet obligations to the ATO. If the service provider does not make the payments to the ATO as required, it will be the employer who the ATO will target for payment, not the service provider. An employer could potentially have to pay the amount again to the ATO even though they have already paid the amount to the service provider

The article goes on to advise any payroll provider should be asked the following questions.

  • are you registered with the Tax Practitioners’ Board as a tax agent or BAS agent?
  • what arrangements do you have in place to hold our funds until they are remitted to the ATO? If this is not a trust account, why not?
  • are your trust accounts audited, or are your financial statements audited each year? If so, please provide a copy.
  • can we renegotiate our arrangements so that we retain the cash required to make payments and are simply provided with a payment file to process each pay-period?

Click here to read the full article

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