Peter runs his own bricklaying business and is considering hiring a full time worker. He will...

Peter runs his own bricklaying business and is considering hiring a full time worker. He will pay his employee a gross wage of $48,500 p.a. His employee is also entitled to 4 weeks paid annual leave and 10 public holidays (2 weeks total). He knows that he has to pay PAYG withholding tax out of the gross wage figure (calculation not required), and has been advised that he has to pay 1.85% in WorkSafe insurance.

a. If this will be Peter’s only employee, does he have to pay payroll tax?

b. Are there any other costs Peter needs to factor in? List and briefly explain.

c. Calculate (showing workings) the full cost to Peter of hiring the above worker.

d. If Peter gives his worker the work vehicle and allows him to use it for personal travel, does this get taxed as well? If so, who pays the tax? (2.5 marks)

Expert Solution

a) Yes

b)payroll taxes are taxes paid on the wages and salaries of employees. These taxes are used to finance social insurance programs, such as Social Security and Medicare. ... The largest of these social insurance taxes are the two federal payroll taxes, which show up as FICA and MEDFICA on your pay stub.

In addition to salaries and wages, the employer will incur some or all of the following payroll-related expenses:

Employer portion of Social Security tax
Employer portion of Medicare tax
State unemployment tax
Federal unemployment tax
Worker compensation insurance
Employer portion of insurance (health, dental, vision, life, disability)
Employer paid holidays, vacations, and sick days
Employer contributions toward 401(k), savings plans, & profit-sharing plans
Employer contributions to pension plans
Post-retirement health insurance

c) Total cost:

48500+1.85%= $49397.25

d)The portion of personal travel on pro-rata basis would be disallowed and also can be said will be taxed.

Regards,

Sushma

ekkarill92 answered 1 month ago

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