Single Touch Payroll: Is Your Business Ready?

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Make sense of headcount, key dates and payroll changes (or not)

In its continued push for digitisation, the Australian government confirmed in September 2017 that the Single Touch Payroll (STP) system will go into effect starting July 2018.

“It means employers will report payments such as salaries and wages, pay as you go (PAYG) withholding and super information to us directly from their payroll solution at the same time they pay their employees.”

— Australian Taxation Office (ATO)

It sounds easy enough, right? In a poll conducted by Accountants Daily, there was little confidence to be found.

But there’s no need to sound the alarm just yet. Here’s what you need to know about STP.

 

Will your business be affected?

Single Touch Payroll is only applicable to employers with 20 or more employees, and it is mandatory starting 1 July 2018. It is expected to include employers with 19 or fewer employees by July 2019.

Another key date to note
The final headcount for whether STP is applicable to your business must be finalised by 1 April 2018. If you have 20 employees by this date, you are by definition a ‘substantial employer’ and will commence reporting to ATO come 1 July 2018.

 

Who to include in your headcount?

Important:

  • Even if your headcount falls below 20 by 1 July, your business is still expected to report through STP unless an exemption is granted, since it will be applicable to ALL business by July 2019.
  • Casual employees who start work again and are paid on or after 1 July 2018 will have to be reported under STP.
  • If company directors are paid through payroll, or if superannuation payments are made for them, then they should be included and reported under STP.

 

How will payroll change?

STP is a reporting solution. It’s designed to help employers update ATO on the payroll information at the completion of each payroll. Employees will then gain access to real-time data via ATO’s online service, myGov.

 

What to do next?

As with the implementation of all new laws, there will be a grace period of 12 months for everyone to get the hang of things. ATO has even declared businesses “will be exempt from an administrative penalty for failure to report on time”.

Instead, take these two steps towards making your business STP-ready.

1. Future-proof with automation

The whole reasoning behind STP is to create a system that’s accessible 24/7, minus the paperwork and manual entry. So if you’re still tracking employee time and processing payroll without the help of technology, it simply cannot continue.

The Fair Work Ombudsman further mandates employers must keep time and wages records for at least seven years. These records must also be accessible for inspection at all times.

2. Choose the right payroll solution

If you’re currently using a payroll software, check to see if and when it will be STP-enabled. You may also choose to engage third-party assistance (i.e. accountant or bookkeeper) with your STP reporting obligations. Employers can find out which payroll software and service providers offer STP-enabled products on the Australian Business Software Industry Association (ABSIA) catalogue.

Ultimately, STP hopes to achieve automated compliance for all parties involved. Take heart in knowing there are successful precedents. The U.K. led the way by fully automating payroll compliance in 2014, followed by France with their Déclaration Sociale Nominative (DSN) in 2016.

The previous PAYE system in the U.K. had remained the same for 70 years, whilst reporting in France before DSN was notoriously arduous, with a mountain of different administrative obligations.

With Australia having one of the most complex wage systems to process payroll in, STP is surely a move in the right direction.

 

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Disclaimer: TSheets does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only and was accurate at the time of publication. It is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.