What is STP?
Single Touch Payroll is a new Australian Taxation office Initiative aimed to provide real time (or limited time) online payroll reporting. It is also being touted as a system or method for employers to lodge employee payroll details with the ATO.
What payroll data do you need to know?
STP reports will be lodged with your pay cycle and the data will be transmitted straight to the ATO. In each pay run, the following data will be reported:
- Employee name and tax file number (TFN)
- Gross amount paid
- Tax withheld on the Gross payment
- Ordinary time earnings for the period
- Overtime and other payments for the period
- Superannuation Guarantee Obligations
What must be reported?
Payments that must be reported include:
- Salary & wages
- Director remuneration
- Return to work payments to individuals
- Employment termination payments (ETPs) – not compulsory if the employee has died
- Unused leave payments
- Parental leave pay
- Payments to office holders
- Payments to religious practitioners
- Superannuation contributions (at the time the payment is made to the fund) this includes Salary Sacrificed amounts paid.
What do I need to do?
The main thing that you need to do is determine if your existing payroll system is STP compliant and if it is not either upgrade or change to a system that is. If you don’t have payroll software, this will mean you will need to obtain and setup a payroll reporting software program for your business.
Ongoing BAS IAS Reporting
With the data that is transmitted to the ATO, payroll details will be automatically prefilled into your business’s activity statements (whether monthly or quarterly) with the amount of PAYG tax withheld amount to pay. There will also be information available each quarter regarding your superannuation obligations, to pay either through the ATO clearing house or other provider.
What are the costs and benefits of STP?
- The ATO will have real time data on every employee and employer in Australia and overseas with a connection to Australia
- There will no longer be a requirement to prepare annual payment summaries as the ATO will have this information as it happens
- BAS and IAS payroll data will automatically be captured and prefilled on BAS and IAS returns
- Super information will automatically also be captured and sent to the relevant funds
- Care will need to be taken to make sure payroll and pay runs are accurate and where errors occur they need to be fixed in a proper manner as the information automatically feeds to the ATO
- Payroll planning especially around one-off type payments for directors and staff bonuses will need to be addressed and transacted live before the end of the financial year. It is now more important than ever to make your end of financial year planning an annual event not to be overlooked
STP – What the ATO is saying
ATO Commissioner Chris Jordan has given his “personal guarantee” that the agency will adopt a flexible and reasonable approach in dealing with the transition toSTP for employers with 19 or less employees.
Recognising the limited time left to the start date of 1 July 2019, small businesses will be allowed to start reporting any time between 1 July and 30 September 2019.
While the official start date will not change, the 30 September deadline has been chosen to give employers more time to make the transition to real-time digital reporting.
Further, any small employer who requests additional time to start STP reporting will be granted a deferral, with exemptions for employers experiencing hardship, or are in areas with intermittent or no internet connection.
There will also be no penalties for mistakes, missed or late reports for the first year.
“We understand that many small businesses and other small employers do not currently use commercial payroll software and they will not be required to purchase such software to report under STP,” said Mr Jordan.
“I want to reassure small [businesses] and give my personal guarantee that our approach to extending single touch payroll will be flexible, reasonable and pragmatic.”
There will be further concessions to the micro-business space, categorised as those with one to four employees, as they make up 60 per cent of approximately 750,000 employers in the small business population.
As such, micro-employers will be allowed to rely on a registered tax or BAS agent to report quarterly for the first two years, rather than each time payroll is run.