What is Single Touch Payroll?
Single Touch Payroll (STP) is the new streamlined system 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.
While larger medical practices seem to be taking STP in their stride, for smaller businesses (such as ‘Mum & Dad’ employers) STP is likely to mean significant change in the way they operate – particularly with regards to using a payroll software.
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?
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 (e.g. and documenting with Excel and Word) 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.
For those employers who don’t they will be unable to claim as expenses such as:
- Salaries and wages;
- Travel allowances; and
- Fringe benefits provided to employees such as motor vehicles, employee meals and gifts.
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; and
Should you require any assistance with implementation, of STP please get in touch with our team at Curve. We are here to help.
For further information on Single-Touch Payroll