By Marie Olesen
Yesterday the Australian Taxation Office (ATO) provided long-awaited details of what Single Touch Payroll (STP) will mean for employers – here are the key points shared by the ATO and what they mean for your business.
When do I have to do something by?
- If you have 20 or more employees you are required to commence reporting via STP from 1 July 2018.
- You need to determine if you fall into this category on 1 April 2018 by doing a head count
- If you have 19 employees or less you won’t be required to be ready for STP until 1 July 2019 at this stage (the start date is yet to be confirmed and legislated)
- You can opt in at any time from 1 July 2018
What does it mean?
Instead of reporting your payroll information to the ATO monthly or quarterly via an activity statement (BAS or IAS) the following pay information will be reported to the ATO each time you pay your employees:
- Gross Taxable Wages
- Tax Withheld
- Superannuation Accrued
This information should be reported before or on the day of your pay run.
It is important to note that there will be no changes to your current payment cycle for PAYG Withholding or Superannuation (e.g. if you currently remit withholding quarterly with your BAS you will continue to do so, superannuation payments must still be made by 28 days after the end of the quarter). When it comes time to lodge your activity statements, W1 and W2 will be pre-filled as the ATO already holds that information.
In most cases, because your payroll information has already been transmitted to the ATO you will no longer be required to prepare and lodge PAYG Payment Summaries and PAYG Payment Summary Statements at year end (you will only need to let the ATO know that the information transmitted to them throughout the year is correct and final). Accordingly, you will no longer have an obligation to provide payment summaries to your employees as their pay information will be available via MyGov, their Tax Agent or by contacting the ATO directly. After each pay run, your employees will be able to see their year-to-date pay details via MyGov.
At this stage, there are no changes to the process for obtaining TFN Declarations or employee choice of superannuation forms. Some software providers currently facilitate lodgement of TFN Declarations electronically, you can continue using this functionality or begin using it as desired. In the long-term, the ATO would like to move towards digitising this process as well, but no timeline is currently set for doing so.
There will be no changes to the SuperStream regime or how you comply with your Payroll Tax requirements.
How Will I Report this Information?
The required information will be reported to the ATO via your payroll provider or via your payroll software. Each software solution will be different so you will need to work with your provider to determine exactly how this process will work for you. In most cases, the reporting should happen via a click of a button as you are only transmitting information that already exists in your payroll software. The reporting cannot be completely automated as you are still required to make a declaration that the information is true and correct (as you currently do when lodging your activity statements).
What If I Make a Mistake?
Don’t worry! If you’ve missed a deadline or made a mistake the ATO has indicated that they won’t seek to apply penalties in the first 12 months while everyone is adjusting to STP. If you’ve made an error with your payroll or lodgement, you will have opportunities to correct what you’ve reported to the ATO. You should attempt to correct an error within 14 days of discovering it and you can do this by lodging a correction with the ATO. However, you will also have the flexibility to make the necessary correction on your next pay run (and if that’s more than 14 days away that’s fine).
What If I can’t be Ready in Time?
That’s ok! If your payroll solution isn’t STP ready by 1 July 2018 your provider should have applied for a deferral on behalf of their customers and advised you of this. If this is the case you don’t need to contact the ATO separately. If you still need more time, you will need to contact the ATO to discuss your situation and negotiate a deferral date. Currently, most software providers are expecting to be STP ready by approximately March 2018.
The ATO has already announced that there will be exemptions for:
- Seasonal employers; and
- Businesses with unreliable internet or no connection at all.
Discussions are ongoing and there may be further exemptions announced (e.g. for very small employers) as we move closer to 1 July 2019 when small employers are due to come on stream.
What Can I be doing Now?
Until your software or payroll provider has finalised their solution there’s not a lot you can do to get ready for STP; however, we suggest the following might be useful:
- Contacting your software or payroll provider and asking them when they’ll be ready, what support/training they might provide and if there will be any additional cost with the introduction of STP
- If you don’t currently have a payroll solution, you will need to choose one that is STP enabled
- Check your compliance – if you haven’t been paying your superannuation on time or meeting your other obligations, now is the time to get back on track as these deficiencies will become apparent with STP
- Review your payroll and associated processes
- What’s best practice?
- If you are generally having to make manual corrections at year end or make fixes through the year, consider if there is a way to prevent these at the source as you will be reporting more frequently under STP
We’ll continue to provide updates from the ATO as they become available, and if you have any particular questions regarding this information please feel free to give us a call for further clarification.