The Government are starting to push through some rather drastic measures in regards to how small business reports to the Australian Tax Office (ATO). In my last blog, I wrote about one of those new measures, Simpler BAS – a new way to report GST for SME’s. In today’s blog, I will introduce another new reporting method called “Single Touch Payroll” (STP). As the name suggests, STP will affect business owners who are also employers. Read on to find out some facts if this affects you.
What you need to know about Single Touch Payroll (STP)
STP is still relatively new in the accounting space so, in today’s blog, I will outline some basic facts as they currently stand (be advised that some of this information may change as the Government continues to develop the product):
- STP is a government initiative requiring employers to report their payroll information to the ATO including gross wages paid, PAYG withholding tax and superannuation at the time a pay run is created i.e. every pay run. The reporting will occur directly from your chosen payroll software solution.
- If you have 20 employees or more then you will be required to report payroll and super information to the ATO via STP.
- If you have 19 or fewer employees as of 01/04/2018, then you don’t need to use STP – you can continue to use your current systems.
- STP starts 1 July 2018. You will be required to do an employee head-count on 01/04/2018 to ascertain if you need to enter the STP system or not. Note: if your software is ready, you can start to use STP from 01/07/2017.
- You will need to ensure your payroll software solution is STP-enabled and ready for use by 01/07/2018.
- Reporting via STP will remove the requirement for employers to issue Payment Summaries (group certificates) to employees, prepare and send the Payment Summary Annual Report (but you will still need to finalise the STP reporting for the year by 14th July each year) and Tax File Number declarations to the ATO.
- Employers WON’T BE liable to a penalty for a late STP report during the first year of compulsory reporting i.e. 2018/19 financial year.
- It is likely that new employees will have the option to complete TFN declarations and Super Standard Choice forms electronically (more than likely via their myGov accounts), making it easier for employers to onboard new staff.
- Data reported via STP will be pre-filled into your BAS. You will be able to pay the PAYG Withholding tax more often if you prefer rather than having to wait until BAS is lodged.
How will STP work?
The easiest way to explain how STP will work is via an infographic prepared by the ATO:
- Here is an STP Information Pack for Employers prepared by the ATO to download.
- If you would like to ask the ATO specific questions about STP, email them at email@example.com
- Streamlined reporting with STP – general fact sheet.
I suppose I don’t really have too many comments at this stage re STP because it’s a relatively new player in the accounting space and as such, will no doubt be subject to further changes and development by the ATO. I will have to see what comes out in the wash in future months, so watch this space! What stands out for me currently, however, is the removal of the annual processing and providing of payment summaries to employees – that will be great news for employers (and BAS Agents) who undoubtedly dread this task each year! Also, I think STP should be available to all employers, not just those with 20 or more staff. This is because STP will streamline the reporting process for employers and also given employees more clarity re their super and tax position at any time during the year, rather than having to wait until year-end. Restricting STP to large employers would be an oversight by the ATO in my opinion.
I think I have more questions than actual comments about STP at the moment – here are some of them:
- Will STP be secure i.e. transfer of data? What type of security systems will be in place given we are talking about the transfer of individuals’ tax and super details?
- Currently, BAS Agents have to obtain signed authorities to lodge any form lodged to the ATO on behalf of clients. Will STP mean that we have to obtain a signed authority to lodge every single pay run with the ATO? I hope not – this would drive my clients insane!!
- If and when mistakes are made in pay runs (and they always are!), how easy will it be to correct them given that pay run data is continually being reported to the ATO via STP, whether correct or not?
There are a lot of unanswered questions surrounding STP, not just those I’ve noted above. If you have questions or comments about this new initiative, please pop them into the comments section below and let’s discuss! I am sure as the ATO develops the product and as software companies begin to introduce their version of STP, there will be many amendments to today’s version of STP!