The way businesses report their employee payroll to the Tax Commissioner is about to change – significantly. If you have 20 or more employees as at 1 April 2018, you’ll need to implement Single Touch Payroll on or before 1 July 2018.
Single Touch Payroll (STP) uses Standard Business Reporting (SBR) to interface your approved payroll software solution with the Australian Taxation Office. STP, amongst other things will dispense with many manual payroll tasks including:
- Reporting Pay As You Go (PAYG) payments
- Tax File Number and Superannuation Declarations for new employees
- End of Year PAYG Summaries.
STP is part of the Government’s Digital Transformation Agency agenda. Its introduction is intended to 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.
Employers currently report PAYG withholdings (tax withheld and payroll data) via their Business Activity Statement (BAS). Employers then need to perform an annual reconciliation to the ATO and provide annual pay summaries to employees. Under the new STP system, this information will be automatically submitted to the ATO via the business’s payroll software or payroll service provider at every payroll cycle or event.
Any employer who uses approved SBR software to manage their payroll is voluntarily able to start reporting using STP from this July. Businesses with 20 more employees will only, at this stage, be obligated to use STP for every pay event from 1 July 2018 being the date of the law is proposed to apply. Very small and micro businesses will not be obligated to use STP.
The implications for businesses using STP are many and while July 2018 may seem far enough away in the future, now is the time to prepare for STP if you haven’t already started.
Under STP, businesses will be interacting with the ATO each pay event. This may require new disciplines in keeping payroll orderly all year round.
Businesses will be expected to purchase or upgrade their payroll software to facilitate this increased reporting. However, the final specifications for STP are yet to be sent by the ATO to developers and digital service providers. It’s important to be talking with your service providers and your tax professional even while these issues are being sorted.
There is validity to the concern to the degree of reconciling that all parties would need to carry out in order to balance the periodic data to any later monthly or quarterly payments. Businesses may also need to change the way they manage and forecast their cashflow so that STP payments can be made in line with their payroll cycle.
All that comes with assessment, purchase and implementing new software requires serious financial consideration and planning. As too, the new practices and staff training that must be done to manage STP moving forward. Small business will have some respite with the $100 incentive offered by the government to offset software upgrade.
There is much to be gained for employers in moving to STP. No longer will there be the need to issue payment summaries, provide annual reports and repetitively fill out paper based TFN and Super Choice forms. The PAYG amount in the quarterly BAS will now be pre-filled by the ATO under the STP program.
Your tax professional is in the strongest position to support you through the transition to STP. For more information about STP and the implications for your business, please contact Robert Lissauer or Peter Pryn at Hall Chadwick Melbourne 03 9820 6400 or firstname.lastname@example.org.