Single Touch Payroll
Single Touch Payroll (STP) is a government-initiated change in reporting obligations for all employers. The Australian Taxation Office has been developing this for some years and testing the system for the last year, and it is now in place and ready to receive employment data. The data to be reported is gross wages, tax withheld and superannuation contributions.
Who is it for?
- Substantial employers (20 or more employees). Substantial employers must enter STP as of 1 July 2018.
- Small employers (between five and 19 employees). Small employers must enter STP as of 1 July 2019.
- Micro employers (between one and four employees). Micro employers must enter STP as of 1 July 2019.
What is it?
Employers must electronically submit payroll and superannuation data to the ATO each time employees are paid.
How will it work?
All the major accounting and payroll software providers have stated they will be compliant with the reporting requirements by 1 July 2018.
- The ATO will gain greater visibility of all employers, enabling earlier activity to ensure the employer is paying their Pay As You Go Withholding tax (PAYGW) and their Superannuation Guarantee Contribution. PAYGW is the income tax employers must withhold on behalf of their employees and then pay to the ATO monthly or quarterly on the Business Activity Statement (BAS).
- Currently, some employers misreport their wages and PAYGW on the BAS to reduce the amount payable. Although the ATO does track down these employers and pursue them, typically it can be a long time (perhaps years) before they are caught. With STP, employers may still misreport wages and PAYGW but they will be caught much sooner because of the data matching.
- Unpaid superannuation continues to be a major issue, with some employers getting away with this for years. With STP, superannuation funds must report to the ATO on payments received. This will allow the ATO to match data and pursue employers who are not paying their obligations promptly.
- It is also aimed at streamlining the individual tax return process, as the ATO will have all employee data pre-populated in the tax return.
What does it mean for employees?
This does not change payments, entitlements or pay slips for employees. Employees will, however, be able to see all year-to-date payroll information online through their individual myGov account. It will no longer be required to provide payment summaries to employees, as this information will also be available online. Individual tax returns will be pre-populated with payroll data. Although it is not yet obligatory for an individual to have a myGov account, it currently seems that an employee must have one if they wish to access all their payroll information online.
What is the impact for employers?
STP means that your payroll system and individual employee information (name, address, date of birth, TFN) needs to be accurate and complete all year. As soon as you engage a new employee, required personal information fields will need to be completed before the first pay run.
It is expected that as part of STP, new employees will be able to submit personal information online to a new employer; there is talk of this information being integrated directly into accounting/payroll software.
An authorised person for the business must submit each pay run to the ATO. This person must be able to verify that the pay information is true and correct.
It will be possible to make pay adjustments—if errors or omissions are discovered after a ‘pay event’ has been reported to the ATO, the information can be corrected in the following pay run. This will ensure that the ATO always has correct year-to-date figures that match exactly with the software.
At end of financial year, the pay runs and all associated payroll accounts will still need to be reviewed and reconciled. Once this is done, the year is then ‘finalised’ and the data submitted to the ATO. Payment summaries are then issued to employees based on the finalised data.
Now is a good time to check that you are paying employees in accordance with the relevant modern award or other industrial instrument requirements.
Payment summaries are still required to be issued to employees up until employers enter STP. Now is also a good time to check that you have all the required personal and contact information on record for all your employees—even if you are a small or micro employer and don’t need to enter STP yet, this will help you get ready for payment summaries due by 14 July.
Micro employers: if you have between 1 to 4 employees, get ready to start reporting now. Transitional provisions apply for two years commencing 1 July 2019 allowing you to report quarterly. Contact your BAS or tax agent for further information.
Small employers: if you have between five and 19 employees, get ready to start reporting between 1 July and 30 September 2019.
Substantial employers: if you had a headcount of 20 employees or more at 1 April 2018, you are classified as a substantial employer; therefore you should already be reporting to the ATO.
Employees to be counted are full-time, part-time, casuals, overseas employees, and any employees who are on the payroll but may be on paid or unpaid leave. There are exemptions for seasonal businesses regarding who must be counted. If you have more than 20 employees for only a couple of months this year, see the ATO detail on exemptions if you think this may apply to you.
Contact us if you would like to discuss your Single Touch Payroll implementation strategy or if you have any questions about your current payroll management systems.
For more detail: ATO Single Touch Payroll
Do you need information on managing employee scheduling? See our blog article Managing Employee Scheduling, Timesheets & Payroll using Deputy & Xero.