The ATO are continuing to move towards real time electronic reporting of payroll information. From 1 July 2018, Single Touch Payroll applies to certain larger employers and requires reporting of payroll information to the ATO each pay cycle. The system will extend to all employers from 1 July 2019.
Single Touch Payroll (STP) is due to commence on 1 July 2018 for some employers. STP is a new reporting regime, introduced to provide the ATO with nearly-real time visibility over payments made by employers to, or on behalf of, employees.
If you are currently using a manual system to pay your staff, you will need to change soon. As an employer, you will be required to report items such as each employee’s name and Tax File Number, gross amounts paid, allowances, tax withheld, ordinary time earnings for the period and any super guarantee obligation directly to the ATO from your payroll software at the same time payment is made to your employees.
Such information will be used by the ATO to pre-fill your monthly or quarterly business activity statement and to advise you of the correct amount of PAYG tax withheld to pay in your activity statement.
Payments that are not processed via your payroll system (e.g. contractor payments, payments of dividends, interests, and royalties etc) are excluded from the reporting requirements.
DO YOU HAVE TO REGISTER FOR STP?
Employers with 20 or more employees
From 1 July 2018, only employers who had 20 or more employees as of 1 April 2018 are subject to STP. These employers are referred to as “substantial employers”. Once an employer is in the STP system, they remain indefinitely even if the number of employees reduces to below 20.
Employers with fewer than 20 employees
If you are under 20, you may voluntarily commence using STP from 1 July 2018. Legislation has been tabled in parliament that will require every employer to use STP from 1 July 2019.
Headcount for a company group
When determining the number of employees, if an employer is part of a group of companies, the total number of employees in the group must be counted. As there are no other grouping rules for STP reporting, trusts, partnerships or partly owned companies are not grouped for these purposes.
If you currently use payroll software, you should check whether your software is correctly configured to report STP information from your applicable start date. If your software isn’t STP-enabled, or you are unsure, please check which payroll software offers STP functionality on the product catalogue on the Australian Business Software Industry Association (ABSIA) website at https://www.absia.asn.au/page/product-catalogue
Alternatively, please contact us and we can assist you in setting up for STP reporting.
If you are using a third-party for your payroll function, you should contact them to ensure they are STP ready and will handle STP reporting obligations on behalf of your business.
If you currently do not have a payroll software, we encourage you to contact us so that we can help you choose a product that offers STP functionality.
Payroll solution providers
The ATO is currently working closely with payroll software and service providers to assist in updating their payroll solutions by 1 July 2018. To assist with the transition, the ATO has announced it will grant a deferral for eligible digital service providers which will automatically apply to all the service providers’ customers. To confirm whether you are covered by the deferral, please contact your software provider or contact us for more information.
Individual employer circumstances
The ATO may defer the STP commencement date until after 1 July 2018 if the employer is affected by circumstances outside their control. These circumstances include the employer being affected by a natural disaster or undergoing administration or liquidation. We can assist you with a request for deferral if required.
PAYG PAYMENT SUMMARIES
For employers who are required to use STP from 1 July 2018, there will no longer be a requirement to provide employees with PAYG payment summaries at year end, or to lodge payment summary annual reports with the ATO. However, payments that are not reported through STP may still require annual reporting and a PAYG payment summary to be issued.
Employees will be able to see their annual earnings and other data at year end by accessing their MyGov accounts online. This information will also be available to the employee’s registered tax agent on the ATO Tax Agent Portal.
PENALTIES FOR NON-COMPLIANCE
Administrative penalties will apply if STP reports are not lodged on time or contain errors or omissions. Under transitional relief, employers will be exempt from penalties for failure to lodge on time for the first 12 months unless the ATO has already provided a warning letter in the 12-month period.
HOW WE CAN HELP YOU WITH STP REPORTING
With the introduction of STP, the ATO will obtain instantaneous access to reported payroll information and it will be important that your payroll systems are ready for this fundamental change in the way information is reported.
We can assist you with any of the following:
1. Which “employees” to include in your headcount (e.g. casual employees who did not work in March 2018, independent contractors, company directors, officer holders are not included in the headcount);
2. Whether you can obtain an exemption from STP reporting (e.g. due to your location in a rural area with unreliable internet connection, or are a substantial employer for short period of the income year only);
3. What are the payroll ‘events’ required to be reported through STP;
4. Whether the start date of your STP reporting obligations can be deferred because of your specific circumstances; and
5. Review and configuration of your payroll systems as required to ensure they are STP-ready.
Please don’t hesitate to get in touch with your usual contact at Baumgartners if you have any questions on Single Touch Payroll.