The way businesses report their employee payroll to the Tax Commissioner is about to change – significantly. From 1 July 2018, if you have 20 or more employees on your payroll as at April 1st 2018, you’ll need to use Single Touch Payroll-enabled software to report your tax and superannuation information to the Australian Tax Office in real time.
Single Touch Payroll (STP) is a new framework for reporting payroll and superannuation information in ‘real’ time as in at the time payroll is processed. The introduction of STP will provide the ATO with greater transparency in payroll reporting amongst Australian businesses and level the playing field somewhat to ensure that businesses meet their employer taxation obligations.
The ATO has scheduled two mandatory dates for compliance. For ‘substantial employers’ being 20 or more staff the date is 1 July 2018 and for small business, July 1 2019 is the proposed mandatory date. A headcount of your total staff, regardless of their employment status, must be determined at 1 April 2018 for you to be considered a substantial or small employer.
The practical implications
Under STP, businesses will be interacting with the ATO each pay event. This means employers will upload information to the ATO on the same day payrolls are processed including:
- Employee payments such as salaries and wages
- Pay as you go (PAYG) withholding
- Superannuation information.
There are many payment types falling into the PAYG category. More specifically, PAYG payments will include:
- Salaries, wages, commissions, bonuses and allowances paid to employees or office holders
- Director’s remuneration
- Payments to religious practitioners
- Return to work payments
- Employment termination payments (ETP) (life benefit)
- Payments for unused annual leave and long service leave
- Parental leave pay
- Payments to an individual under the Seasonal Labour Mobility Program
- Superannuation contributions.
Excluded from reporting are payments to contractors for services provided.
The benefit for employers
STP, amongst other things will dispense with many manual payroll tasks including:
- Reporting Pay As You Go (PAYG) payments
- Termination payments
- Tax File Number and Superannuation Declarations for new employees
- End of Year PAYG Summaries
- Providing pay slips to employees
- Fill out paper based TFN and Super Choice forms.
Eventually, the STP information will be used to prefill your activity statement.
As an employer, you no longer need to provide PAYG statements. Employees can access this information through their myGov account linked to the ATO.
Be ready for July 1st 2018
If you haven’t already, immediately contact your payroll software service provider particularly if they haven’t contacted you. Most providers have included ATO’s specifications in their software and are ready to upgrade your software.
Hall Chadwick is in a strong position to support you through the transition to STP.
We understand there will be further changes on how streamlining superannuation, salary sacrifice and reportable fringe benefits will be made through STP. These were not available at the time this article was prepared. We will provide an update as soon as these details can be clarified.
Q 1 Do I include casuals and part-time staff in my headcount on April 1st?
Yes. Your headcount should include:
- Full-time and part-time employees
- Casual employees on the payroll on 1 April 2018 and worked anytime during March 2018
- Employees based overseas
- Employees absent on paid or unpaid leave
- Seasonal employees.
Q 2 Are there general exemptions?
The ATO has advised it will determine exemptions and deferrals on application to the Commissioner if an employer is unable to report through STP.
Q 3 My business keeps a manual payroll spreadsheet which has served us well for many years. Do I have to change?
No. If you are not using payroll software already or indeed STP enabled software, you can ask a third party to manage the process on your behalf. Outsourcing your payroll to a payroll service provider or tax professional using STP-enabled software may give you a solution for the short or longer term. Hall Chadwick can lodge your information on your behalf.
Q 4 Am I required to provide PAYG summaries?
No. PAYG summaries will be a thing of the past. However, you may still choose to provide PAYG summaries to your employees during transition if this better suits your work environment.
Q 5 How does this tie into SuperStream?
The ATO will match your reported liabilities against your reported payments.
An anomaly will arise for family run small businesses. These businesses are currently exempt from SuperStream. There is no such exemption for STP.
Q 6 Will my PAYG withholding amounts be self populated into my activity statements?
Over time yes, this will occur. For now, you are still required to lodge activity statements.
Q 7 As an SME business, how do I report salaries and director’s fees?
SMEs can no longer have these as the last item in the accounts. These figures will now need to be reported on a live basis before 30th June.
Q 8 How should this be explained to my staff?
It’s important for your employees to know they will still be paid the same way. Your employee will need a myGov account linked to the ATO in order for them to see their statements. An employee without a myGov account can request statements directly from the ATO.
Q 9 Does this change how I start a new employee?
New starter employees may now complete their Tax File Number declaration and superannuation fund of choice forms online.
Q 10 We own a number a number of businesses. How should I calculate my headcount?
Where individual businesses are part of a wholly owned group, the total number of staff in each business attribute to a total headcount. It will be the group’s total headcount position on April 1 2018 that will determine being either substantial or small employer.