How to prepare for the impending Single Touch Payroll System
From 1 July 2019, Single Touch Payroll (STP) – the direct reporting of salary and wages, PAYG withholding and superannuation contribution information to the ATO – will apply to all employers.
The new rules push all businesses with employees into the single touch payroll system. This includes the situation where payments are made
to the owners of the business in the form of salary, wages or directors fees. What employers need to report will also be
extended to include certain salary sacrificed amounts.
Getting the right software
You MUST make sure STP will be compatible with your systems. If your current systems are not compatible, you'll need to make updates and changes . This needs to be done sooner rather than later, to ensure everything is smooth sailing (touch wood) when STP rolls around in a few short months.
The ATO has asked software providers to provide new low-cost payroll options for micro employers with 1-4 employees. MYOB and Xero have announced new $10 per month offerings (limited to 4 employees) with other software houses following suit.
There are details of these options available on the ATO website:
Dates and Details
While the start date for small employers will technically start on 1 July 2019, small employers can actually start reporting through single touch payroll any time from 1 July 2019 until 30 September 2019.
Some more good news - no penalties will be applied to mistakes, missed or late reports for the first year.
If your business is in an area with no viable internet connection, such as some rural and remote regions, then exemptions may apply.
Exemptions also apply to "closely held payees" for the first financial year. Closely hold payees are directly related to the
entity, such as family members of a family business, directors of a company and shareholders or beneficiaries.
The Nitty Gritty
STP requires PAYG withholding and superannuation contribution details to be reported to the ATO as payments are made to employees or superannuation funds.
When it comes to PAYG withholding, employers will report details of salary and wages paid to employees as well as the PAYG withholding amount at the time the payment is made to the employee.
Employers have the option of paying the PAYG withholding liability at the same time, although this is not compulsory.
Have no idea what this means, or you feel your eyes glazing over? Get
What needs to be reported:
- 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)
- Salary sacrificed amounts (from 1 July 2019).
Avoiding complaints and penalties
Underpayment or non-payment of superannuation guarantee (SG) is a big issue. New laws will enable the ATO to advise employees (or former employees) of their employer’s poor SG payment and reporting history.
If an employer makes a complaint to the ATO, then a taxation officer is able to make a record or advise the employee about a failure or
suspected failure by their employer or former employer to comply with their SG obligations. They can also share the Tax Commissioner’s
response to the complaint. So, if the Commissioner finds there is a problem with SG payments, they can disclose this information to the
Getting Advice & Support
To make sure you're ticking all the right boxes, crossing your T's and dotting your I's, it can be worth investing in help from an experienced source.
If you have any concerns about complying with the impending STP legislation get in touch with us, and we'll clarify your position.
You can also find out more about our tax and bookkeeping services here.
Feeling really, really stuck on the whole STP process? Come and speak to us in person.