Single Touch Payroll is Coming

[ a change to ATO processes impacting all employers sooner or later ]
by Michelle Burton Published

Single Touch Payroll (STP) is coming and for many businesses it will be the biggest compliance change since the introduction of the Goods and Services Tax in 2000.

Who does it impact?

STP is mandatory for any entities considered a ‘substantial employer’ as at 1 April 2018.

You are a substantial employer if you have 20 or more employees. Please note that this test is not conducted based on full-time equivalent [FTE] employees – any employees whether full-time, part-time or casual are taken into account [even if they are currently on paid or unpaid leave]. You can however exclude independent contractors and company directors.

It seems like a cruel April Fool’s joke but it is not to be taken lightly.

If you are close to 20 headcount, you may choose to voluntarily opt in to the reporting obligations as there are some benefits to STP reporting.

When does it impact you?

If your headcount of employees is 20 or more, you will be required to comply with STP reporting obligations from 1 July 2018. For any businesses below the 20 headcount, the changes do not kick in until 1 July 2019.

What is the impact?

Under the STP requirements you need to report wages, superannuation and PAYG withholdings at the time you pay your employees.

More information is available on the ATO website.

How will you report?

Utilising cloud technology is a very effective way to implement STP reporting. STP presents an opportunity to review and improve your payroll reporting process for tax withheld and superannuation obligations. If you are using desktop based software, it is likely that your software is not STP compliant. STP will require real time reporting to the Australian Taxation Office via internet enabled software.

The major software providers [Xero, MYOB and Quick Books Online] have been working closely with the Australian Taxation Office to ensure readiness by 1 July. All three have their releases in beta testing. If you use an alternate payroll software, contact your payroll software provider. The Australian Taxation Office will have a process to request a deferral of reporting obligations if your software provider is not ready in time for 1 July.

What processes does it change?

Once STP reporting begins, several processes will change for your payroll reporting

  1. Employee tax file number reporting and choice of superfund will be provided to your payroll software via the employee’s myGov account.
  2. Wages and PAYG tax withheld amounts are reported on the day wages are paid.
  3. Superannuation amounts are reported on the day the obligation paid.
  4. Annual PAYG payment summaries will no longer need to be provided to employees or to Australian Taxation Office.
  5. From 1 July 2019, your activity statements will be prefilled with the STP data reported during the period.

Due date for payment does not change

STP aligns your reporting obligations with your payroll process. STP will not change the payment due date of your PAYGW amounts. These will remain on your monthly or quarterly activity statement frequency, or 7 days if you are a large withholder.

What do you need to do now?

If you are an employer what do you need to do to prepare for STP?

Step 1: Confirm whether you need to comply by 1 July 2018 or 2019 [you may choose to report through STP before 1 July if your software is ready]

Do a headcount of your employee as at 1 April.More tips on who to count is available here.

Step 2: Consider whether your payroll processing systems will comply with STP

Talk to your payroll software provider to find out how and when your current payroll solution will be ready

For recent updates by Xero, MYOB and QBO check out these links:

  1. https://www.xero.com/blog/2018/03/single-touch-payroll/
  2. https://www.myob.com/au/support/single-touch-payroll
  3. https://quickbooks.intuit.com/au/resources/small-business-accounting/introducing-single-touch-payroll/

You can also refer to the Australian Business Software Industry Association (ABSIA) product catalogue for details of STP-enabled products and third-party solution providers.

Step 3: Review your payroll processes

The STP reporting is based on real time processing, therefore, there is a risk that unintentional human error may occur in your payroll process and be reported before the error is identified. Check your current payroll and HR process for any processes that can be automated or processed with less manual data entry.

Step 4: Review your payroll data

Check your employee and payroll data by checking the employee information in your system is accurate [remember information will now be sent automatically to the ATO]. This should include:

  • Organisation details including ABN and address
  • Employee Names [check spelling]
  • Employee Addresses
  • Employee date of birth
  • Employee tax file numbers

Step 5: Get employees online

STP reporting removes your requirement to provide annual payment summaries to employee - these will be available via the employee’s myGov account. Similarly, employees will no longer complete a tax file number declaration form to update their tax details. These will be provided to the payroll software via their myGov accounts.

Arrange for all employees to update or set up their myGov account and link it to the ATO’s online services.

Do you feel you are ready for Single Touch Payroll? If not, feel free to get in touch with the accounting team at businessDEPOT.

General Advice Disclaimer

Information provided on this website is general in nature and does not constitute financial or legal advice. Every effort has been made to ensure that the information provided is accurate, but information may become outdated as legislation and new government announcements are made. Individuals must not rely on this information to make a financial, investment or legal decision as it does not take into account their personal circumstance. Before making any decision, we recommend you consult a licensed adviser or legal practitioner to take into account your particular objectives, circumstances and individual needs.

Michelle Burton
read more by Michelle Burton

Michelle has experience advising small to medium sized business and individuals from many industries including construction, manufacturing, medical, consulting and property development.

Michelle specialises in preparation of financial reports and income tax returns, Taxation Office reporting requirements, structuring issues, management reports, MYOB and Qbooks processing.

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