Special Tax Bulletin - Single Touch Payroll Update
Understanding Single Touch Payroll obligations
Single Touch Payroll (‘STP’) is a Government initiative aimed at cutting red tape for employers and improving visibility of compliance with business obligations such as:
salary and wages and similar payments;
Pay As You Go (‘PAYG’) withholding; and
certain superannuation related information;
by requiring ‘real time’ reporting of payroll information directly to the ATO.
Importantly, STP is designed to extract information that already exists in an employer’s payroll system. As such, it is not intended to impose any additional burden on employers, other than requiring them to report the information to the ATO sooner.
From a practical perspective, businesses must use STP compliant software to comply with the new obligations. This will necessitate updating or changing their current payroll software. Generally, most payroll software providers will have already adapted their software to ensure the required reporting capability has been incorporated.
Once a business has adopted the appropriate software, ongoing reporting obligations should be dealt with as part of an automated software function. Effectively, employers will send their employees' relevant payroll information required under STP to the ATO each time they run their payroll and pay their employees. Crucially, in complying with their STP obligations employers will not change their payroll cycle.
When a business reports to the ATO via STP, the relevant employees will be able to view their year-to-date tax and super information through myGov.
As a result of STP reporting, several ongoing compliance obligations for employers will be streamlined, and/or removed. Some benefits for employers under STP include the following:
The removal of the need to issue an annual 'Payment Summary' to employees for payments reported to the ATO via STP, provided an employer lodges a 'finalisation declaration' (i.e., generally by 14 July, although extensions are in place for the first year of STP implementation).
The removal of the need to lodge a 'Payment Summary Annual Report' for payments reported through STP.
From 1 July 2019, STP will enable the pre-filling of BAS Labels W1 (gross salary and wages and other payments) and W2 (amounts withheld from salary, wages and other payments) for employers that are small or medium withholders.
The streamlining of employee documentation such as the lodgement of ‘TFN Declarations' and 'Withholding Declarations' via enabled software.
Original commencement date
STP commenced from 1 July 2018, for employers with 20 or more employees (i.e., substantial employers). When determining whether or not the 1 July 2018 start date applied, an employer was required to do a headcount of the number of employees they had on 1 April 2018.
Broadly included in the headcount were all full-time and part-time employees, casual employees who worked at any time during March 2018, overseas employees, any employees absent or on leave (paid or unpaid) and seasonal employees.
Pending STP commencement date for small employers now law
Small employers (being those with less than 20 employees) are now technically required to commence their STP reporting obligations from 1 July 2019. The intended STP obligations on small employers has only recently become law, with the Treasury Laws Amendment (2018 Measures No. 4) Bill 2018 finally being passed by both houses of Parliament on 12 February 2019.
This means that from 1 July 2019 all employers, no matter their size, will generally be required to comply with the STP reporting obligations. The ATO says it will be writing to small employers who have 19 or less employees and already use payroll software to tell them about STP and remind them that if their payroll software offers STP, they can update their software and start reporting now.
Solutions for micro employers
For micro employers (generally defined as businesses with one to four employees) who do not currently have payroll software, a range of simple, low-cost solutions are expected to be available from early 2019.
These solutions may include mobile apps, simple reporting solutions and portals.
An alphabetical list of the companies intending to offer these solutions has been published on the ATO website (and reproduced for your reference below).
The ATO does not (and nor does our firm) specifically endorse any of the suppliers listed below:
AccXite Pty Ltd
BAS Off Pty Ltd
Easy Pay Slip Pty Ltd
Employment Hero Pty Ltd
e-PayDay Pty Ltd
Etax Accountants Pty Ltd
Free Accounting Software
Intuit Australia Pty Ltd
LodgeiT Pty Ltd
Myaccountant Technology Pty Ltd
MYOB Australia Pty Ltd
OB Secure Messaging
Reckon Australia Pty Ltd
Single Touch Pty Ltd
SRI Enterprise Software Pty Ltd
Xero Australia Pty Ltd
Flexible ATO implementation
The Commissioner of Taxation, Chris Jordan, recently made a personal guarantee that the ATO’s approach to STP will be “flexible, reasonable and pragmatic”.
Despite the 1 July 2019 start date for small employers, the Commissioner has stated that they can start STP reporting any time from 1 July 2019 to 30 September 2019.
This effectively provides a three-month implementation reprieve for small employers.
The ATO has also indicated that there will be no penalties for mistakes, missed or late reports for the first year and exemptions will be provided from STP reporting for employers experiencing hardship, or in areas with intermittent or no internet connection.