Single Touch Payroll and Small Employers
Single Touch Payroll (STP) commenced on July 1, 2018 for large employers (with 20 or more employees), however, from 1 July 2019 small employers (with less than 20 employees) are required to report details of employees’ tax withholding and superannuation information to the Australian Taxation Office (ATO) at the time they process their payroll using Single Touch Payroll (STP) software.
Single Touch Payroll is also called 'real-time payroll reporting' because it means every time a business pays their staff, all the salary information is sent to the ATO. This includes wages, deductions and superannuation information, eliminating the need for Pay As You Go Withholding Activity Statements throughout the year.
Businesses still doing payroll manually will be forced to adopt a digital system over the next 12 months now that employers with fewer than 19 workers are caught under the Single Touch Payroll (STP) reporting regime. It has been described as the ‘biggest compliance undertaking since the GST’, with more than 700,000 employers technically required to become compliant with the new system by 1 July, 2019.
Employers may need to choose new payroll software if their current software does not offer Single Touch Payroll Reporting and the ATO recommends employers speak with their registered Tax Agent or Accountant to establish which software product best suits their needs. The ATO requested software developers to build a low cost Single Touch Payroll solution at or below $10 per month for micro employers. A register of more than 30 suppliers of these low cost STP solutions are on the ATO’s website and we understand the Tax Office has been discussing a possible digital banking solution with the major banks over the last 12 months.
Basically, it's a more efficient way to run the taxation system. In theory, it also makes it harder to operate in the 'black economy' because the ATO has a better understanding of who is being paid what and when.
Single Touch Payroll is designed to streamline business reporting and help the ATO monitor whether employers are complying with their Superannuation Guarantee and PAYG Withholding obligations. By reporting through Single Touch Payroll, employers need not complete Pay-As-You-Go Withholding Activity Statements throughout the year and Payment Summaries will be available to employees through MyGov.
Implementing Single Touch Payroll and lodging reports may pose some concerns for business owners. The extension of the STP reporting requirements to smaller employers raises the worry that they may not be aware of the changes and micro employers (four or fewer staff) may not have digital payroll software or access to a reliable internet connection. To assist, the ATO will:
- Offer Micro Employers (with 1 to 4 employees) help to transition to STP and other alternative options (for example, allowing those who rely on a registered Tax Agent or BAS Agent to report quarterly for the first two years, rather than each time payroll is run);
- Allow small employers to start reporting any time from the 1 July 2019 to 30 September 2019 and granting deferrals to small employers who request additional time to start STP reporting;
- Not apply penalties for mistakes and missed or late reports for the first year; and
- Provide exemptions from Single Touch Payroll reporting for employers experiencing hardship, or in areas with intermittent or no internet connection.
Finally, if you need any help with your payroll, withholding tax or superannuation obligations, please contact us today.
This article forms part of our March 2019 Business Accelerator Magazine. Click HERE to download the latest edition or browse other articles below:-