Single Touch Payroll (STP) is a new government initiative designed to streamline business payroll reporting and obligations. Whilst it has been compulsory for larger employers to report on this basis for some time, it will now be compulsory for ALL employers from 1 July 2019.
STP is a new reporting process which requires employers to report all employee payments including salary and wages, allowances, superannuation and PAYG withholding to the ATO directly; each time a pay run is processed. To achieve this, more often than not an employer will be required to upgrade their payroll software to be compliant, or perhaps implement payroll software for the first time.
The process for STP will involves-
Upgrading existing software to be compliant with STP compliant software.
- Entering all employee details into that software
- Provide ATO and Fair Work compliant pay-slips to employees at the time of payment ( you should already be doing this!)
- Calculate Superannuation entitlements.
There are some exceptions to the 1 July 2019 implementation date:-
- Employers with less than 19 employees can commence reporting at any time between 1 July 2019 and 30 September 2019.
- The ATO will grant deferrals to smaller employers who face difficulty with implementation.
- Employers with 1-4 employees who rely on a registered tax agent can report quarterly for the first two years, rather than each pay run.
- It is common practice for accountants to determine wages to family members as part of an end of year tax planning strategy. Reporting of these payments can occur every 12 months provided that the family member is not paid a regular wage or salary.
- Where the business owner pays themselves drawings as and when cash is available, these payments will be required to be reported quarterly.
By opting in to the STP system, smaller employers can enjoy the advantage of Streamlined reporting process. As the the ATO will already have year to date figures, there will be no need to perform annual reconciliations and payments summaries.
You will still need to report Gross Wages and PAYGW on the quarterly Business Activity Statement, but this will reconcile with what has already been reported.
Employers need not fear that they will need to pay PAYG Withholding and superannuation entitlements directly to the ATO each time payroll is processed. This was clearly political fear mongering designed to gain an advantage at the election. Can you imagine the impact this would have on employers who already struggle to pay these amounts even quarterly? Don’t rest on your laurels however as this is indeed a future strategy that the ATO has in mind.
Given all of this, Certum are currently assisting clients with the integration of payroll systems that are compliant with STP. Feel free to contact us if you have any queries.