Single Touch Payroll: Changes Ahead

Australia’s Single Touch Payroll (STP) legislation is about to start impacting business owners, payroll managers and employees across Australia. The legislation stems from the Budget Savings (Omnibus) Bill 2016 which was enacted on 16 September 2016. STP is about increasing transparency, streamlining reporting and making sure all employers are meeting their taxation and super obligations.

So what are the changes we will see?

    1: Development in Software
    First, payroll software providers have been developing updates so their software will be enabled for Standard Business Reporting (SBR). The ATO has a number of preset descriptions and codes for different payroll elements that need to be embedded into payroll provider’s software so that the ATO system can ‘read’ any reports forwarded from the payroll software. Payroll managers will then work with their software providers to ‘map’ the ATO codes to their existing payroll elements. Once that is done then the software is then ready to submit reports to the ATO.

    If you have outsourced your payroll, then the company taking care of your payroll should be on top of these changes and communicating with you about them.

    2: Changes to the Payroll Process
    Instead of holding off until the end of the financial year to submit tax and super information to the ATO, businesses will start reporting this on a ‘per-payment’ basis. This is not mean to be an involved task. The idea is that:
      • When you pay employees your payroll software will generate a report of the pay run and submit that to the ATO and myGOV. Payments that must be on the report are:
          • Salary and wages
          • Director remuneration
          • Return to work payments to individuals
          • Employment termination payments (except if the employee is deceased)
          • Unused leave payments
          • Parental leave pay
          • Payments to office holders
          • Payments to religious practitioners
      • Employees will be able to see a cumulative payslip/payment summary via logging into myGov.
      • When you pay superannuation funds your payroll software will generate a summary of the superannuation paid and submit that to the ATO.

    3: Changes to Payroll Reporting
    If every payment is reported as you make it then there is no need to produce payment summaries or complete a payment summary annual report, because both the ATO and employees (via myGov) have effectively already been provided the information these documents used to give them.

    Also, when new employees are hired by a business reporting via STP, they can login to their myGov account and electronically provide the Tax File Number Declaration and Superannuation Standard Choice Form to their new employer. These documents will be prefilled with their relevant information from by myGov. As part of the process of sending these forms to the new employer, myGov will send them to the ATO, removing the need for employers to have to onforward these documents to the ATO themselves.

    If you fail to report as required then administrative penalties may apply. However the ATO has made it clear that the period from 1 July 2018 to 30 June 2019 is regarded as a transition time and no penalties will be issued during that period.

    4: ATO and Government Data Matching
    With payment information being reported at the time of payment, the ATO will be able to pick up earlier when a business is struggling to meet or deliberately not meeting their PAYG withholding and/or superannuation guarantee obligations. This means there is more potential for these situations to be rectified, with employees receiving their due super and the government being forwarded the PAYG withheld. It also means that the playing field of business will become more fair as businesses won’t be able to secure a competitive advantage by not paying superannuation entitlements etc.

When will these changes take place?
In the long term, STP reporting requirements will apply to all employers. Short term, the roll out has been staged based on number of employees:

    • If your business employed 20 or more employees as at 1 April 2018 then the legislation requires that you report using SBR enabled software from 1 July 2018.
    • If your business employed 19 or less employees as at 1 April 2018 then you have until 1 July 2019 before it is mandatory that you report using SBR enabled software. However they can also choose to commence reporting via SBR earlier if preferred.

When determining how many employees you had on this date include any persons who worked full time, part time or casual (any time during March). Employees based overseas or on leave (whether paid or unpaid) should also be included. Directors and contractors do not need to be included.

Note: if your business is part of a wholly owned group then your number of employees is deemed as the number of employees across the total group. So you might only have 5 employees but if other member entities have 15 or more employees then each member entity of the group is required to report using SBR enabled software from 1 July 2018.

Some exemptions are available – for example rural employers who lack a reliable internet connection and employers with a large number of seasonal workers.

Also no administrative penalties related to STP will be issued for the period from 1 July 2018 to 1 July 2019.

What do I need to do to make sure our business is compliant?

    1: Count your employees
    Complete a head count as at 1 April 2018 so you know whether you are required to be compliant before 1 July 2018 or 1 July 2019.

    2: Work through the checklist
    Download the ATO Single Touch Payroll checklist for employers. This takes you through the key steps in ensuring your business is ready to use the system.

    Note if your software is not SBR ready and you are required to start reporting from 1 July 2018 there are conversion options that may help. Obviously you could change to software that is SBR ready but that is a big project. Something like MessageXchange, that converts a file from your system to the STP required format, may be an appropriate interim measure.

    3: Train relevant staff
    If you are running your payroll in house, make sure the relevant staff know about any changes they may have to make going forward for SBR to work. As your pay roll is going to be reported to the ATO in real time, any mistakes included will also have been reported. So when you fix the mistake, you also need to report that to the ATO.

    4: Prepare employees
    This is not a compliance step but you may find it helpful to give each employee a copy of the Single Touch Payroll for Employees document from the ATO so they have a heads up on what STP will mean for them.

If you have any questions from this blog post we would be happy to discuss. Call us on 03 5339 3200 or contact us here.

Thanks for reading.

By Genna Kidd

The information contained on this website has been provided as general advice only.  The contents have been prepared without taking account of your personal objectives, financial situation or needs.  You should, before you make any decision regarding any information, strategies or products mentioned on this website, consult your own financial advisor to consider whether that is appropriate having regard to your own objectives, financial situation and needs.

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