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