Christmas bonuses and other festive payroll matters
Wanting to acknowledge the hard work of your employees this year? Make sure you report Christmas bonuses and other one-off payments correctly this holiday season.
From Christmas cash bonuses to overtime payments, many employers make extra payments to their employees at the end of the year. As an employer, you should be aware of how these payments arerequired to be reported to the Australian Taxation Office (ATO) and treated for superannuation guarantee purposes.
Christmas bonuses
Christmas or performance bonuses are lump sum payments made to employees as a reward for their performance, service or reaching a specific goal.
Keep in mind when paying a Christmas or performance bonus that:
Superannuation guarantee is payable on these bonuses as they are ordinary time earnings.
When reporting through Single Touch Payroll, these payments should be separately itemised under bonuses and commissions.
Tax should be withheld from these payments — refer to the ATO’s Tax table for back payments, commissions, bonuses and similar payments.
Gifts
Unlike bonuses, gifts to employees do not go through payroll and are not subject to superannuation guarantee or PAYG tax withholding. Non-entertainment gifts (such as Christmas hampers, bottles of wine, gift vouchers or flowers) are not subject to fringe benefits tax if valued less than $300 (per employee).
Overtime payments
Holiday shopping and year-end parties make the festive season one of the busiest periods in retail and hospitality. This often leads to employees working overtime — work performed outside the ordinary hours set out in their award, enterprise agreement or employment contract.
Where an employee works under an agreement or award that stipulates ordinary hours of work, no superannuation guarantee is payable for overtime payments. Bonuses paid specifically for overtimeonly and on-call allowances outside ordinary hours of work are also not subject to superannuationguarantee.
However, overtime payments will attract superannuation guarantee if the employee’s ordinary hours of work are not stated in an award or agreement or are not separated from other hours. This will occur where an employee has no stipulated ordinary hours of work, and no pattern of regular or usual hours.
Overtime payments should be separately itemised for Single Touch Payroll reporting under overtime.
This includes payments for on-call, stand-by or availability allowances and overtime bonuses relating entirely to time worked outside of normal hours. Note that leave loading paid that is demonstrably referable to a loss of overtime is also reported under Overtime.
Tax is required to be withheld from overtime payments to employees. In most situations, overtimepayments are added to the employee’s other earnings for the period and tax withholding is calculated based on the standard tax tables.
For payments that are similar to a bonus in nature, tax should be withheld by reference to the ATO’s Tax table for back payments, commissions, bonuses and similar payments. Such payments include one-off overtime bonuses and leave loading made as a lump sum (that is, not on a pro-rata basis as leave is taken).
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