What is it?
Single Touch Payroll (STP), is the new streamlined way for the ATO to receive payroll and superannuation data from employers. It represents a significant change and businesses will need to ensure they are ready to meet the new obligations.
A two part roll out
STP became compulsory for ‘substantial employers’, businesses with 20 staff or more, from 1 July 2018. Those employing less than 20 staff will need to comply from 1 July 2019.
How will it work?
Businesses will, by way of their payroll software, send the ATO an electronic message at the time employees are paid. That transaction will contain all details of each employee’s gross, tax and net payments, superannuation, and lastly, details of new employees and terminations.
Currently employers report Pay As You Go (PAYG) withholdings via their Business Activity Statement (BAS). Under the new regime this information will be submitted to the ATO at each pay event, via payroll software. STP will remove the need for businesses to produce PAYG Payment Summaries for employees. It will also provide the ATO with a substantial amount of information on every payroll transaction across the country.
Advantages for the ATO
- Live reporting will assist the ATO in monitoring employers struggling to meet their PAYG withholding and super obligations and, where necessary, intervene early for those falling behind. It is hoped that this will somewhat stem the flow of businesses going under with substantial employee benefits unpaid.
Advantages for employers
- Employers will no longer have to provide annual PAYG summaries to employees or perform the annual reconciliation to the ATO therefore simplifying administration.
Advantages for employees
- The myGov portal will be updated throughout the year detailing income, PAYG withholding and super guarantee contributions meaning employees can access information in a timely manner thus enhancing transparency
What do you need to do?
Most of the large payroll software providers are compliant already. If you are in doubt you should touch base with your software provider as soon as possible. Due to their size, Xero has a six month roll out arrangement with the ATO. Employers with 20 employees or more will be invited to join STP between now and December. A prompt will appear in Xero when your time has arrived. You can access a helpful Xero blog and video on the topic here.
The biggest change will be for small (mum and dad, Independent Associates etc.) businesses who, to date, have never used a payroll software. From 1 July 2019 you simply will not be able to pay wages manually any more. We stress the importance of not leaving this until the last moment to get yourself organised. Get your software in place this financial year in anticipation of the changes to come.
You should also take this opportunity to review employment arrangements with any related (and non-related) parties ensuring all facets of an arms-length employment arrangement are in place. This would include employment agreements, job descriptions, ongoing records of work performed, arms-length remuneration, Workcover etc.
Should you require any assistance with implementation, or any related matters, please get in touch with our team. We are here to help.
For further information on Single-Touch Payroll