Single Touch Payroll – will my business be affected?
The Australian Taxation Office (ATO) has introduced a new initiative, Single Touch Payroll (STP), that impacts business payroll reporting from 1 July 2018. This article will provide an overview of the system and help you determine if your business is obliged to comply with these new requirements.
What is STP?
STP is a government initiative that will change the way you report your payroll information to the ATO, and is mandatory for employers with 20 or more employees.
Employers will be required to report gross payments, PAYG Withholding and superannuation information for each employee, every time they process a payroll during the year.
The initiative has been introduced to provide more transparency about what employers are paying their employees, whilst providing employers with assistance in meeting their reporting obligations. STP also gives the ATO information about what superannuation benefits accrue each period which will enable these benefits to be matched against payments in order to ensure that employers are meeting their Super Guarantee (SG) obligations. This is an important factor because under the present arrangement the ATO generally would not know if you are meeting your SG obligations unless an employee complains that it hasn’t been paid.
The ATO will also prefill the Gross Wages (W1) and PAYG Withholding (W2) on your periodic activity statements based on the information they receive each pay period. You will still need to complete your end of period reconciliations to ensure the information the ATO has is accurate. It is important to note that your payment obligations for PAYG Withholding will not change.
Counting your employees
Your employees are counted at 1 April 2018. If you have 20 or more employees on that day, you must comply with STP. Once you are in the STP system, you cannot leave, even if your employee numbers fall to 19 or less, unless the ATO grants an exemption (see below).
You complete a head count of all employees including full time, part time, casuals who worked anytime in March, those absent on leave (paid or unpaid), seasonal employees and those based overseas. You do not count employees that ceased work prior to 1 April or casual employees that didn’t work in March. You also exclude independent contractors, company directors/office holders and those working from a labour hire company.
If you find that you have 19 or fewer employees on 1 April 2018 then you do not have to enter the STP system, however you must count your employees on 1 April each year to determine if you are required to enter at the start of the next financial year.
I have 20 or more employees, what do I do now?
You do not need to register for STP you simply need to start reporting from 1 July 2018.
In order to begin reporting the ATO advises that you need to have “a payroll solution that is Single Touch Payroll-enabled.” For most employers this means you, or your bookkeeper/accountant, use an accounting software program to prepare your payroll each pay period. If you are using one of the mainstream retail products such as MYOB, Xero, Quickbooks Online or Reckon Accounts, they are all on record saying that they will be ready by 1 July.
At this stage we understand there will be a single button press at the end of each payroll process that will lodge the STP report with the ATO. At year end there will be a ’finalisation’ button, rather than downloading the ‘EMPDUPE’ file and this will notify the ATO that there are no more pays to come and they can prefill the information received throughout the year on the respective employee’s tax returns. This action must be done by 14 July each year. This is expected to replace the Payment Summary process, meaning you may no longer be required to provide payment summaries to your employees.
If you use custom built software, you need to get in touch with your provider to ensure that they will be ready by 1 July. If not, you may need to find an alternative solution.
If you currently have a manual process for preparing pays, you will need to implement a Single Touch Payroll-enabled solution from 1 July 2018. As this may require consideration changes to how you pay your employees we suggest you consider implementing a solution prior to 1 April, to ensure you are ready for 1 July.
Can I get an exemption?
The ATO have advised that they will grant exemptions from STP under very limited circumstances, such as living in a rural location with no reliable internet or having large number of employees for only a short period of the year, such as during a harvest or those impacted by natural disaster.
I have 19 or fewer employees, can I voluntarily enter STP?
Yes. Again, there are no registration requirements, you simply start reporting however as noted above, once your business enters the STP system. You cannot leave unless you are granted an exemption.
What else should I do?
Find out more about STP by viewing the ATO guide: https://www.ato.gov.au/about-ato/about-us/in-detail/strategic-direction/streamlined-reporting-with-single-touch-payroll/
Contact the team at WLF to help you determine your business reporting requirements and to discuss solutions that will help you comply with STP.