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Last year saw the commencement of STP (Single Touch Payroll) for businesses with 20 or more employees. This year on July 1 the ATO is hoping to enforce STP for those businesses with under 20 employees. Is it a big undertaking of the government? Yes. In fact, the biggest since the introduction of GST in July of 2000. Should you care about it? The answer is also yes. As a business owner, STP will hopefully make your life easier.
What is it?
Single Touch Payroll is the new way that employers will report their employees' tax and super information to the ATO. This reporting is done through payroll software that offers STP reporting, such as Xero or MYOB. Through this software, the information is sent either directly or through a third party to the ATO. Information such as:
- Salary or wages information
- Tax withheld
- Super guarantee amounts
- Ordinary time earnings
Below is a diagram showing how it will work.
Why is it here?
The idea of STP goes back some time to 2014 when the ATO set out its intentions to introduce a more digitised way of reporting. It has been a fairly gradual process since its inception, with large employers transitioned last year and small business to transition this year. Essentially it's here to ensure the ATO will have more up-to-date records via businesses using STP-compliant accounting payroll software. This in turn means:
- Businesses are less likely to fall behind on superannuation and PAYG payments
- That our taxation system will be more efficient; hopefully costing taxpayers less
- Payroll process and reporting will be easier and more efficient
- Greater transparency for the ATO; making black economy activity harder
It is here and ready to roll out, there is no ignoring the fact that as a business owner, change can be stressful. But we are here to help.
How will it affect me?
The greatest gift of all is that with the introduction of STP there will be less reporting for you to worry about. You will no longer have to submit reports such as:
- Employee-related PAYG-withholding information in activity statements
- Payment summaries to individual employees
- Payment summary annual report to the ATO
Consequently, all of this will now be available via myGov and ATO online services. If you are properly set up for STP, not having to produce and distribute all these reports will save you both time and money.
What do I do next?
Depending on your circumstances, you have a few options. Firstly, if you do not currently use commercial payroll software you might want to look at purchasing it if possible. Acquiring payroll software will move you into the digital age and most importantly make your life easier. You want to ensure that well before July 1 you talk to either your accountant or payroll software provider to make sure that your payroll is STP enabled, in some cases you may need to update your existing software. Don't leave it until the last minute. You will need to ensure that:
- Your employees are being paid correctly
- Your employees' super entitlements are calculating correctly
- You are addressing overpayments correctly
- You have been maintaining accurate information including names, addresses, TFN, and date of birth records
If you fall into the micro business category (1-4 employees), the ATO is allotting assistance with the changeover. They are working with payroll software providers in the hopes that some alternative and cheaper solutions can be provided. Employers also will be exempt from penalties for the first 12 months after 1 July 2019 as they are committed to helping employers get used to the new process. Also, for extenuating circumstances, you can apply for a deferred start date.
How can we help?
We can help you prepare for Single Touch Payroll by doing a review of your current payroll setup. We will ensure:
- Pay templates are configured properly
- Leave balances are correct and all accounted for
- Your super clearing house is set up correctly
- You have an efficient workflow process and are able to run the reports you need
We can also discuss and review your timesheet process to see if we can streamline it allowing you to have accurate pay runs every time. Get in touch with us today!