Payroll Processing

What is payroll processing?

Payroll processing covers all the steps required to manage employee payments, payroll records and ATO reporting requirements. 

If you’re a small business owner, you might handle payroll processing yourself. Larger companies might hire a bookkeeper or payroll manager to handle payroll or outsource their payroll processes.

What are the main functions of payroll processing?

Payroll preparation

You need to open a payroll bank account to pay employees. You should only use this account to pay your employees and hold money for taxes and other payroll-related expenses.

Payroll calculations and deductions

You need to calculate each employee’s gross pay based on their contract, including pay for public holidays, leave and overtime. Payroll software, such as MYOB, can automatically calculate pay, superannuation contributions and other deductions, such as:

• PAYG (pay-as-you-go withholding)

• taxes on benefits, including bonuses and allowances

Payroll payments

You should always issue payslips to each employee detailing their gross income, any deductions and their net pay. Payroll software can issue direct deposit payments and provide a portal through which employees can access and review their pay slips.

Payroll record keeping

You should keep payroll records (electronic or paper) for 5 years.

Payroll compliance

You must submit a Single Touch Payroll (STP) report to the ATO detailing payroll payments, super contributions and tax withholding. (MYOB can automatically issue these reports for you).