Will Single Touch Payroll affect my business?
The Australian Taxation Office (ATO) has introduced a new system, Single Touch Payroll (STP), that may impact your business payroll reporting from 1 July 2018. This guide will help you determine if and when your business is obliged to comply with these new requirements and provide an overview of the new system.
What is Single Touch Payroll (STP)?
STP is a government initiative that will change how you report your payroll information to the ATO. It is mandatory for employers with 20 or more employees from 1 July 2018; the government has announced it will be mandatory for all remaining employers from 1 July 2019, although this is subject to legislation being passed by federal parliament.
Employers subject to STP 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 system 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.
The ATO will also prefill the Gross Wages (W1) and PAYG Withholding (W2) on your monthly or quarterly activity statements based on the information they receive each pay period through the STP system. You will still need to complete your end of period reconciliations to ensure the information the ATO has is accurate. It is also important to note that your payment obligations for PAYG Withholding will not change.
Counting your employees
Your employees must be 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 subsequently fall to 19 or less, unless the ATO grants an exemption (see below).
On this day, you must complete a headcount 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 this year, however if legislation is passed by the Government you will be required to enter the STP system in 2019.
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 in the STP system 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, using an accounting software program or cloud-based solution 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 to implement their STP solutions by 1 July 2018.
For traditional “desktop-based” accounting software, you must have upgraded to the latest version of this software and also have an internet connection. If you are using a cloud-based solution, such as Xero, you won’t need to do anything extra to be able to access the STP system.
At this stage, we understand that there will be a single button press at the end of each payroll process that will lodge the STP report directly with the ATO through your payroll product. At year-end there will be a ’finalisation’ button 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 would be in place of submitting an annual electronic summary file each year (EMDUPE file) as currently occurs. This action must be done by 14 July each year.
If you use custom built payroll 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 payroll solution or apply for an exemption (see below).
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 it may not be a simple process to move to a new payroll process, we suggest you consider implementing a solution early to ensure you are ready for 1 July.
Can I get an exemption?
The ATO has advised that they will only 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?
If you would like more information or if you’re unsure whether your current payroll solution is adequate, get in touch with your contact at Ipsum Advisors.