Voluntary Agreements in your Payroll Software

Processing large payrolls in Elite Payroll Software is easy.

Pay As You Go (PAYG) voluntary agreements enable businesses to withhold amounts from payments they make to workers (such as contractors) to help the workers pay their income tax.

If your payee is paid under a voluntary agreement, use the information provided in the agreement form to work out the amount to withhold.

To set up a contractor under a voluntary agreement, select Voluntary Agreement from the tax scale drop-down list on the Employee Record – Taxation tab.

How much must the payer withhold from payments?

The rate of withholding is either the payee's instalment rate as notified by the ATO or a flat rate of 20 per cent. The payer then withholds at the appropriate rate from the gross amount payable after deducting any goods and services tax (GST) charged.

The payee's instalment rate is a percentage figure normally used to calculate PAYG instalments. The ATO will generally notify payees of their instalment. For the purpose of voluntary agreements, the instalment rate used must be the rate notified by the ATO - this is called the Commissioner's instalment rate (CIR).

 The payee must disclose their CIR or state that they don't have one.

 If the payee has a CIR greater than 20 per cent, the payer must withhold at the CIR.

 If the payee has a CIR of 20 per cent or less, the payer must withhold at the flat rate of 20 per cent unless the payee and payer agree to use the CIR.

 If the payee's CIR isn't known at the time of the agreement, the flat rate of 20 per cent applies.

Payments under a Voluntary Agreement are reported on the Payment Summary – Voluntary Agreement, which can be filed electronically.

Note that you cannot change an employee set up with Employee status to Contractor status. You must terminate the employee and then create a new employee record with Contractor status.