And how does it affect you?
From a tax point of view, the recent Federal Election result means that things will remain ‘business as usual’ for most businesses. However, there is a major system and reporting change coming for over 700,000 small businesses in the form of Single Touch Payroll (STP). STP has been dubbed the biggest compliance undertaking since GST was introduced in 2000.
It is a new way of reporting tax and super information to the ATO electronically through STP compliant payroll software. The information is sent to the ATO each time you run your payroll and pay your employees.
The ATO is therefore collecting payroll data ‘live’ rather than getting an annual submission from employers. Employers will still need to check their annual payroll and then confirm that it is accurate before closing the year off.
How does this affect you?
20 or more employees
Businesses with more than 20 employees were required to become compliant from 1 July 2018 unless a deferral had been granted. Most of these employers will now be using compliant software and reporting.
Less than 20 employees/More than 4 employees
Small businesses with fewer than 20 employees will need to be STP compliant by 1 July 2019. The ATO understand this will be a transition and have provided extensions, deferrals and options to suit your circumstances. The ATO have granted everyone an automatic deferral up until the 30 September 2019. Anything after this date will require either a further deferral or an exemption if the business meets the criteria.
Micro Employees (1-4 employees)
For micro employers who do not use payroll software (i.e. manual paper calculations, excel, etc.), the ATO have published a list of affordable STP software that allows you to report your payroll information to the ATO.
Another option available is to have your Registered Tax Agent report your STP information quarterly instead of each pay run. This option will be available until 30 June 2021, however after this date you will be required to make the move to STP compliant payroll software.
Closely held payees
For businesses who employ closely held payees (family members) there are flexible reporting options available to you. If you employ less than 19 employees, you do not need to report closely held payees until 1 July 2020. The ATO is also aware that you may not pay a regular salary or wage throughout the year which is why you will be able to report a reasonable estimate of the wages paid to each closely held payee each quarter and make any adjustments year end.
Benefits of STP
Payroll is a critical operation for every organisation. Although STP is designed to allow the ATO access to real time payroll and superannuation data to enhance their compliance activities, there are also obvious benefits to businesses who implement STP:
- Software will assist with automation of payroll, payment of superannuation and paying staff
- No need to do manual calculations of PAYG and superannuation once the system is setup
- Annual payroll lodgement is reduced to a review exercise
- Employees can access their current wage and super data through MyGov during the year
- Some payroll solutions will have employee portals, allowing them to complete time sheets, apply for leave and see their leave and super information