Single Touch Payroll is coming… is your business compliant?

As you may be aware, the Australian Taxation Office has recently announced a change to the way that employers are obligated to report the payroll information of their employees.

Although the initiative (known as Single Touch Payroll) will start on July 1^st 2018, businesses cannot afford to simply be complacent until July! The next three months are a critical time for ‘substantial employers’ (employers with more than 20 employees as of the 1^st of April, 2018– including full time, part time and casual employees, as well as overseas employees, employees on leave and seasonal employees) to get a grasp on how they  will update their existing processes for STP, as well as to ensure that they have compliant payroll software before the changes must kick in.

Businesses with less than 20 employees, although unaffected for now, should still pay attention to the changes as the Government has plans to extend STP to smaller businesses from July 2019. From July 2018 to July 2019, small employers may also voluntarily opt-in to STP if they wish.

Why STP?

The Single Touch Payroll initiative was announced back in late 2014 as part of the Government’s ‘Digital by Default’ program, aimed at reducing administrative costs and burdens for employers by simplifying superannuation and tax reporting obligations. Under the STP initiative, employers will use Standard Business Reporting enabled software to digitally report payroll and superannuation information to the ATO at the same time as their employees are paid.

To fulfil their obligations under STP, employers must upgrade their existing payroll software (or alternatively, acquire compatible software) before the July 2018 deadline.

Some substantial employers may be granted exemptions from the ATO for one or more income years, but strict exemption clauses apply. These clauses include:

• If an employer has entered administration or liquidation
• If an employer needs to align its reporting with related entities
• If an employer has been impacted by natural disaster or situation outside of their control

Some existing customers of specific software providers will also have a deferral.

Any business wishing to seek a deferral/exemption should get in contact with their accountant ASAP to ensure deadlines are met and no ATO penalties are incurred.

STP works like this:

Step One: The employer pays their employees using their payroll solution. A pay slip is generated and the bank file is transferred, and the employee then receives payment of their salary/wages.

Step Two: The ATO then receives information including salary/wages, tax withheld and super liability. Upon receiving this information, the ATO matches it to the right employer/employee account.

Note: Super Funds will report from 2019 onwards.

What information will be visible online?

What will change?

• Payroll software must be updated to STP-compliant software by July 2018 for substantial employers.
• Reporting payments to employees to the ATO and of PAYG withholding amounts & super at the same time.
• There will be no obligation to provide most employees annual payment summaries (with the exception of reportable employer super contributions and reportable fringe benefit amounts not reported by STP). However, a finalization declaration needs to be completed annually with the ATO.
• Employees will have real-time access to their data via the ATO portal on MyGov.

What won’t change?

• Employee pay cycles.
• Due dates for remittance of PAYG withholding and payment of contributions to super funds.
• There are no specific registration requirements for STP and lodging the first report through your STP enabled payroll software is enough notification for the ATO.

If you currently use a payroll software to report payroll information to the ATO, you’ll need to check with your software provider if it is STP enabled.

• If your software is compatible, then you are ready for July 1st STP reporting.
• If you’re not sure if your software is compatible, then you’ll need to check which payroll software offers STP compatibility. This information is available on the ABSIA product catalogue.
• If your software is not compatible, then you’ll need to update to a STP compatible software ASAP.

Under the new STP initiative, one of the largest issues that business will face is ensuring that their data is totally accurate. Since data will be electronically sent to the ATO in real time, businesses will not have the same degree of flexibility that they are currently used to in being able to review forms manually several times before sending to the ATO.

Incorrect information or information that is out of date can result in errors and delays, so it will be crucial to ensure that all employee information (including TFNs, full names, birthdays and current addresses) are recorded with accuracy in your payroll data.

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Is your business ready for Single Touch Payroll on July 1^st, 2018?

If you’re unsure if your payroll software is STP compatible, need assistance switching to a new software or would like help ensuring full compliance for your business, we’ll be happy to help.

Or, importantly, if you’re seeking a deferral or exemption – or if you have fewer than 20 employees and would like to voluntarily opt in to STP before July 2019 (when additional Government roll outs are planned to occur), speak to us today! In business, you cannot afford to leave your financial obligations to chance.

Contact us today for an obligation-free chat about your STP obligations.

This article is general information only. It does not give business, accounting, taxation, financial planning or other professional advice or service. It does not consider your specific situation, objectives or needs and if personal advice is required, a detailed analysis of your particular circumstances would need to be sought. Please see our Privacy and Disclaimers page for further information.