This time last year there was a lot of talk about the 1 July 2018 introduction of Single Touch Payroll (STP) reporting for businesses with 20 or more employees.
Now the focus turns to smaller businesses - those SME with fewer than 20 staff will be required to process payroll via STP from 1 July 2019, with legislation recently passed in the Senate.
There are some elements of the STP roll-out for smaller businesses that still need to be defined by the ATO, however it's clear that all businesses that employ 19 or fewer staff now need to be aware of what STP is, and what it will mean for their payroll processing and reporting into the future. It could also mean upgrading accounting software to manage payroll processing under STP reporting.
What do you need to know?
STP will require you to have your payroll transaction data transferred to the ATO each time your employees are paid. This may require you to use a software solution that will transmit the data to and from the ATO on your behalf.
This payroll or reporting system must be STP compliant, so that each pay cycle you can report the following items to the ATO:
- each employee's name and Tax File Number (TFN);
- gross amount paid;
- tax withheld on the gross;
- ordinary time earnings for the period; and
- any superannuation guarantee obligations.
The ATO will then report to you each month or quarter the correct amount of PAYG tax withheld to pay through your activity statement. Also, each quarter there will be information available regarding your superannuation obligations to either pay the ATO clearing house or your independent provider.
As part of the new regime, the reports and liabilities owing will be available to you in real time. This means you will be permitted to make payments towards PAYG tax withheld and superannuation contributions in your pay cycle before the due date.
Accounting and Payroll Software
If your accounting system is already automated with reports that can provide the information listed above for every pay cycle, all you need to do is confirm if your product is STP compliant.
Understandably, micro employer businesses (one to four employees) may not want to invest in more costly accounting software to become STP compliant, especially those that don't already have payroll software. The ATO has compiled a list of software suppliers who have indicated that they will offer low-cost STP solutions for smaller businesses in advance of 1 July 2019 - you can view the list here.
Our recommendation is to become STP ready by 1 July 2019 to avoid any fines or penalties in the future from the ATO, so if you are still using a manual system or desktop accounting software to process payroll, it might be time to discuss and review your internal processes with one of our accounting advisers.
Sole traders who do not employ other staff (but draw wages themselves) will not be subject to STP reporting.
The ATO has also just released the following update about STP:
- Micro employers will have time to transition and your Accountant will be able to report quarterly for the first two years.
- Small employers (five - 19 employees) will be given a grace period of until 30 September 2019 to begin submitting live pay data without penalty.
- Deferrals and exceptions are available for employers experiencing hardship, or in areas with intermittent or no internet connection.
THREE Steps to be STP ready
- Does your accounting and/or payroll software support STP reporting?
If you are unsure, contact us immediately and we can help you review your business accounting and payroll systems.
- When do you need to start reporting using STP?
If you had 20 or more employees on 1 April 2018, STP has been mandatory since 1 July 2018 - you should contact us if your business is not yet STP-compliant. For businesses with 19 or fewer employees your deadline for mandatory reporting is 1 July 2019, however you can opt in for it prior to that date and there is a grace period of three months to get it right.
- Is your payroll team aware of these changes, and your employee data up-to-date?
You don't want to start using STP with inaccurate employee information - ask your employees to confirm all the personal details you hold on file for them.
For more information about Single Touch Payroll, you can download our Financial Fact Sheet here.