Single Touch Payroll (STP) Reporting – What’s new?

After a series of delays, the proposed legislation extending mandatory STP to include smaller employers (those with 19 or fewer employees) has now been passed, with amendments, by the Senate.  The Bill now returns to the House of Representatives to consider the Senate’s amendments.

With STP being a step closer to becoming law, smaller employers are encouraged by the ATO to take adequate measures to ensure they are compliant in time for the start date of 1 July 2019.

Unsure where to start and whether you are affected by the changes? Below are the key requirements of STP:

• STP will require your employees’ payroll and superannuation information to be reported to the ATO on or before each pay day. This information will be provided to the ATO through your STP enabled payroll software.
• At the end of the financial year you will no longer need to provide employees with a PAYG Payment Summary for payments already reported through STP.
• Employers will no longer be required to lodge a payment summary annual report to the ATO for payments reported via STP. Instead, a year end finalisation declaration will be due for lodgement with the ATO by 14 July.
• Employees will be able to view their year-to-date payment information via the myGov website.
• From 2020, the ATO will pre-fill small and medium employer’s BAS with payroll and PAYG withholding information.

With only five months until 1 July 2019, we recommend smaller employers who are impacted by the expansion of the STP measures to take the following steps:

1. Review your current payroll systems to ensure they are STP capable.  If not, consider alternative STP enabled solutions such as:

• Subscribe to an online STP enabled cloud-based reporting software such as Quickbooks Online, Xero or MYOB.  We understand older MYOB desktop versions such as Accounting and Accounting Plus will not have STP reporting capabilities.Employers using the payroll functionality in these older software packageswill need to consider upgrading or moving to an alternative solution.
• If you are a smaller employer, consider whether to outsource your payroll functions to a suitably qualified third party such as a registered BAS/tax agent or a payroll service provider.
• If you are classified as a ‘micro employer’ (employer with one to four employees) who will need to report through STP but do not currently have payroll software, you may consider the following:
• Simple and low-cost STP solutions which are/will be available on the market this year at a cost of $10 or less per month. A list of suppliers is available on the ATO website (click here). Baumgartners can also provide support and training on various complying software packages including Xero, Quickbooks Online and MYOB.
• The ATO has announced that tax and BAS agents will be able to report on behalf of micro employers on a quarterly basis rather than each time a payroll period is run (see below)

2. Review your current payroll practices to ensure compulsory superannuation payments are made by the due date.

3. Proactively engage and communicate with your employees on the changes that will be introduced once STP is adopted. For further information and to access a fact sheet that can be provided to employees click here.

With the widespread application of STP, below are some frequently asked questions which may be helpful when getting STP compliant.

1. Will STP be applied to closely held entities such as single director companies, Mum and Dad operated companies, or clients where payrolls are not run on a regular basis?

The ATO recognises that businesses with closely held payees do not necessarily have regular payroll runs. The ATO has advised that there will be arrangements and support to facilitate the transition to STP as well as the option to report quarterly over a 2-year transitional period. The ATO will be releasing publications on reporting options for closely held entities in due course.

2. If you decide to adopt STP in March 2019, would you still need to prepare a payment summary for the full financial year.

Although the required start date is proposed to be 1 July 2019, smaller employers can commence reporting via STP earlier at their election.  Employers who transition to STP part-way through the 2019 financial year will have various options to move across depending on the methods used by their STP software provider.  These include starting STP reporting with zero year-to-date balances and giving payment summaries to all employees for payments made before the first STP pay run. For further information, click here.

3. What are the criteria for being eligible for quarterly STP reporting?

Micro employers who use a tax or BAS agent for their BAS lodgement will be able to lodge their STP reports quarterly at the same time as lodging their BAS during a 2-year transition period. Further guidance will be published by the ATO on this in due course. In the meantime, the ATO have advised that eligibility criteria such as being up to date with payments and lodgements will need to be met to access quarterly STP reporting.

4. Will there still be a requirement to provide employees with payslips through each pay cycle?

Yes, payslips will still need to be provided to employees as currently required.This is a Fair Work obligation.

5. Under STP will withholding tax, superannuation guarantee and wages be paid at the same time or will the existing payment dates apply? Will you be required to lodge SGC forms per normal given the transition to STP?

The due date for payment of your wages, PAYG withholding and superannuation contributions is not affected by STP.You will also need to continue using SuperStream for the reporting and payment of your SGC obligations.

The expansion of STP reporting to cover smaller employers will involve some short-term challenges including, for some employers, migration to new accounting and payroll systems.

If you are impacted by STP and would like to discuss how we can assist, please do not hesitate to contact Julie Tse jct@baumgartners.com.au or Ferdane Kaso f.kaso@baumgartners.com.au of our office on 03 9851 9000.