What are payroll records?
Payroll records contain details of how your employees are paid. They are responsible for forming the foundation of your compliance obligations as an Australian employer and protect both you and your team if an audit or dispute arises. Payroll records monitor the information you need to process, calculate, and verify each employee’s compensation. This includes:
- Pay rates and hours worked
- Bonuses, overtime, and commissions
- Balances and leave entitlements
- Superannuation contributions
- PAYG withholding amounts
- Employment start dates
- Tax file numbers
- When and how payments were made.
What payroll records should be kept?
General employee details
You need to start with general employee details on your payroll system. For this, you need to record:
- Name and date of birth of your employee
- Start date of employment
- Whether the employee is working full-time, part-time, or casual
- Tax file number
Pay and earnings records
You are required to maintain a clear record of what each employee earned and how it was calculated. This includes:
- Net and gross pay amounts
- Annual salary or base hourly rate
- Penalty rates, overtime, allowances, and loadings
- Commissions, bonuses, and incentive payments
- Deductions such as salary sacrifice, tax, and union fees
- Pay period, payment date, and payment method
Hours of work
Accurate records protect you during a Fair Work Audit and allow you to resolve pay disputes quickly. It is important to record the following for each employee:
- Record when the shift was started and finished.
- The number of hours an employee works each day and each week.
- Any overtime hours.
- Break times taken.
Leave records
Leave entitlements must be recorded properly:
- Annual leave, personal leave, and long service leave accruals.
- Leave taken and the dates when it was taken
- Leave balances
- Any leave loading payments
PAYG withholding records
PAYG withholding is the tax deducted from employee wages and sent to the ATO. You need to maintain records of:
- Withheld amount for each pay period
- The tax-free threshold claimed by each employee
- Any withholding variation notices from the ATO
- Payment summaries or income statements released.
Digital record-keeping tips: how often to review records
Using payroll software is advantageous to reduce manual errors, making compliance easier. Have a closer look at the following tips to get your record-keeping on track:
- Use cloud-based payroll software, which can automatically calculate pay, superannuation, tax, and leave entitlements. Cloud storage ensures that your records are backed up, you can access them from anywhere and protect them from physical damage like flood or fire.
- You can seek help from a payroll specialist or bookkeeper for small businesses to help you set up your system to produce and store pay slips each pay cycle. With this, you don’t need to depend on manual filing. Be sure that your software is integrated with STP, allowing seamless ATO reporting each time you process payroll.
- It is important to review your employees’ details daily to check whether they are up to date, including super fund choices, tax file numbers, and personal information. Run a quarterly review to identify any discrepancies before they become trouble for you.
- You are required to keep digital copies of all supporting documents and your payroll records, including variation letters, leave requests, employment contracts, and termination correspondence. When you have everything in one place, it will save you time when you need to respond to an audit or employee query.
How long to keep payroll records in Australia?
It’s important for Australian employers to keep payroll records for at least 7 years under the FWA. This rule applies to all employee records, whether the person is still employed or has left your company. The ATO has a separate requirement for tax-related records: you must keep those for at least 5 years from the date you file the relevant tax return. Payroll records may overlap with tax records; you need to keep everything for at least 7 years to meet both obligations. The 7-year period starts from the date when the record is made. For employees who left the company, it starts from the last entry in the record. For accurate records, you can rely on bookkeeper services Melbourne.
Conclusion
The blog sheds light on the payroll records you need to keep and how frequently you need to review them. You can get reliable bookkeeping services and payroll services by getting in touch with us.