For employers with 19 or fewer employees, single touch payroll (STP) legislation will be coming into effect on the 1st of July 2019. Are you ready?
WHAT IS SINGLE TOUCH PAYROLL?
For employers with 20 or more employees, you will already be familiar with STP, but if you are unaware, STP is the mechanism for sending tax and super information to the ATO directly from your payroll or accounting software every time you pay your employees. The legislation was passed in February this year to extend this to employers with 19 or fewer employees.
WHAT DOES STP ACTUALLY MEAN FOR MY BUSINESS?
STP will require employers to report salaries, pay as you go (PAYG) withholding and super contributions at the same time as they process their employees’ pay. The initiative will enable employers to automatically report superannuation and taxation information to the ATO when wages are processed.
You will need to make sure your current payroll software is updated by your digital service provider (DSP) to offer STP Reporting, or choose payroll software that is STP-enabled. Employers who have already upgraded their payroll solution to be compatible with STP can begin using the system now if they wish.
Small Employers can start reporting anytime from 1 July 2019 to 30 September 2019 and the ATO will grant deferrals to small employers who request additional time to start STP Reporting.
TELL ME, WHAT ARE THE BENEFITS OF STP?
We’re glad you asked. STP is a win-win for employers and employees because it streamlines the payroll reporting process for employers and provides greater transparency around super entitlements for employees. Benefits include:
Employers will no longer need to prepare and lodge PAYG payment summaries with the ATO or provide copies to employees. Instead, the employer will complete a finalisation declaration through their STP-compliant software to confirm all employee payments. Employee payment summaries will then be available through the employee’s MyGov account.
Employees can track their year-to-date payroll and super information online through their MyGov account.
Employers will be reporting superannuation liabilities to the ATO for the first time and this will be cross-checked with the employees’ Super Fund providing payment information to the ATO. This will ensure that employees receive the correct superannuation due and will highlight areas of superannuation non-compliance to the ATO. Employers will need to be vigilant to remit the correct amount of employee superannuation and on time.
HOW TO PREPARE YOUR SMALL BUSINESS FOR STP
If you currently use accounting software to record payroll:
Most popular payroll software companies will have the correct facilities ready to go, such as Xero and MYOB. If you are unsure, talk to us. There are a few things to be aware of you as you get ready to use STP reporting.
- Check your software – make sure your current payroll software is up to date or choose payroll software that is STP-enabled.
- You will need to activate STP reporting in your current payroll system which will link the payroll system to the ATO database. This can be done now.
- Ensure you have factored STP into your payroll process.
- Ensure your payroll compliance is up-to-date generally, including employee benefit, wage and super entitlements and maintaining accurate records.
If you currently record payroll manually or use software that does not support STP:
- You will need to either purchase new accounting software that is STP compliant or outsource the payroll reporting to an external provider.
- You can also purchase a payroll only product which will solely deal with the STP reporting. The ATO has prepared a list of approved suppliers that will be offering a no cost or low cost STP payroll solution in the next few months.
- Employers with 4 or fewer employees can choose to outsource their payroll to an external provider. If you chose this method, there are two options available for lodging STP data:
- You can lodge your STP data quarterly via your Tax or BAS agent for the first 2 years up to 1 July 2021.
- Provide your payroll information to third party who lodged your payroll information to the ATO on your behalf on their STP payroll software.
Talk to us today, we can assist your business in becoming STP ready and ensuring that your payroll obligations will be satisfied before 1 July 2019.
