With Christmas being the time for giving, many employers may be thinking of providing a bonus to employees.
When employees are paid bonuses this is income to them and needs to be treated as such.
In effect the rule is that all payments to employees should be put through the payroll regardless.
Employers and employees need to understand that there are income tax consequences of receiving a bonus.
The employer must:
- deduct PAYGW from the amount;
- remit the PAYGW to the ATO;
- report the gross amount on the employees’ payment summary; and
- claim a tax deduction for the gross amount paid.
For the employee:
- the gross amount will be included in their taxable income; and
- tax will be payable on the bonus payment
There may be other options to reward your team, with guidelines surrounding Christmas Parties and giving of gifts in lieu of a bonus.
For more information, call the office on 0890914447.
This information has been prepared for general purposes only. Many of the comments in this article are general in nature and anyone intending to apply the information to practical circumstances should independently verify their interpretation and information applicability to their particular circumstances.