UPDATE MARCH 2019: The ATO has announced a deferment of the Single Touch Payroll (STP) obligations for payments made to ‘closely held payees’ (essentially owners and family members). For employers of less than 20 people, the payments they make to family members, directors & shareholders do not need to comply with STP requirements until 1 July 2020.
Single Touch Payroll was introduced 1 July 2018 for businesses with 20+ staff. From 1 July 2019, small businesses (with fewer than 20 employees) and larger businesses, who had extensions granted through their accounting software, will also need to start reporting using Single Touch Payroll. While the ATO has recently announced the exception for ‘closely held payees’ above, all other employers must be ready to get ready for the switch.
What is Single Touch Payroll (STP)?
STP is a new regulation that changes when and how small businesses report payroll activity to the Australian Tax Office (ATO). Until now, small businesses have finalised their payroll records at the end of the financial year and produce payment summaries (for each individual employee and a summary report) at that time. With STP, this will no longer be required. Employers will supply their payroll data to the ATO on a pay-by-pay basis.
How does Single Touch Payroll impact your business?
From 1 July 2019, you will have to transfer your payroll transaction data to the ATO each time your employees are paid using a software solution to do this.
For ongoing reporting and payments, this means:
- There will be no need to complete W1 and W2 (Wages & PAYGW) figures on ATO activity statements.
- If your business is currently not reporting GST and you are lodging electronically (ie. Instalment Activity Statements), you will lose your current 2-week extension period.
How do employers get ready for Single Touch Payroll?
Because you will need to submit compliant reports every payday, you will need a payroll or reporting system that is STP compliant. So this means:
- If you use online payroll software: Your software will most likely be able to submit these reports. Just make sure it produces ATO-compliant reports. You should contact your software provider early to ensure this capability is in place.
- If you use desktop payroll software: You will need to find a service that can upload your payroll reports, convert them into the ATO’s required format and submit them on your behalf.
- If you use spreadsheets or manual workings: You will need to find a service to convert the data into a compliant digital report format and submit it on your behalf.
Please contact your local Accru advisor if you need assistance with finding a software provider that is right for you.
Australian Taxation Office policies for the transition period
- Micro-employers* The ATO will offer micro-employers help to transition to STP and several alternative options – such as allowing those who rely on a registered tax or BAS agent to report quarterly for the first two years, rather than each time payroll is run.
- Small employers* can start reporting any time from the 1 July start date to 30 September 2019. The ATO will grant deferrals to any small employer who requests additional time to start STP reporting.
- Penalties: There will be no penalties for mistakes, missed or late reports for the first year.
- Exemptions: The ATO will provide exemptions from STP reporting for employers experiencing hardship, or in areas with intermittent or no internet connection.
– If your software will be ready, but you won’t, you will need to apply to the ATO for a deferred start date using their online form.
– If your payroll software provider will not be ready, they will provide you with a deferral reference number from the ATO and a new date to start reporting using STP.
STP instructions from major software providers
Below are helpful instructions for the three major payroll software providers:
Above all, remember Accru advisors are here to help you through the process if you need it. We assist our clients with all aspects of cloud accounting and tax compliance. Please do not hesitate to contact us for support.
* Employer size guidelines (according to the ATO)
Micro Employers: businesses with 1 to 4 employees
Small employers: businesses with fewer than 20 employees
Large/substantial Employers: businesses with 20 or more staff