If you are either registered for GST or employ staff this blog is for you. I’ll help you understand the difference between ATO tax codes and tax tables to better equip you during this busy period.
At the most basic level, tax codes are the little three-letter codes that are assigned to each and every transaction that you process and they tell your accounting system whether or not there is GST in the transaction or not and what rate. For those of you already familiar with MYOB online accounting, the most common tax codes are:
These tax codes are already setup in your MYOB accounting software, so you can start using your file straight away. There are also a number of other tax codes already in there for those of you in the motor vehicle industry or wine industry so you don’t need to worry about the complex rate calculations.
READ: Last minute tax tips
Tax tables relate to the amount of income tax (otherwise known as PAYG withholding) applied to your employees’ wages for each and every payroll you process. The tax tables are all inclusive of income tax, the Medicare levy and any HELP debt and the idea is that by having the right tax tables in your accounting system, you won’t be over-taxing your employees or worse under-taxing them so they won’t get any nasty surprises when they lodge their tax returns.
Each May when the Budget is announced, the government announces tax changes to the coming years income tax rates and HELP repayment rates. More recently they’ve also made changes to the Medicare rates too. In order to ensure you are taxing your employees the correct amount these ‘tax tables’ need to be updated absolutely every single year.
In MYOB Essentials, a pure cloud accounting product, the team at MYOB automatically updates these tables in the background for you so when you do your first payroll for the new financial year it will always be correct.
For a better understanding on how the tax tables work, here’s a great blog by Amanda Gascoigne that explains it beautifully.