Our tax system requires an employer to deduct tax from employees’ wages and at the end of the quarter give the money to the ATO. The tax deducted is then credited off the employees’ tax bill. This system leaves the tax deducted from wages in the employer’s bank account for up to four months. Similarly, the 9% minimum superannuation employer contributions are required to be paid quarterly but will be retained by the employer for up to four months.
It is very tempting to dip into this cash to pay the business accounts, but be warned: if the company does not pay the PAYG and superannuation on time the directors become personally liable for the unpaid amount. If you are unable to budget for these forward payments we recommend transferring the funds to a separate bank account after the payroll payments are made. This bank account should only used for ATO payments.