Is your business ready for Single Touch Payroll?
If you are an employer the way you report payments, such as salaries and wages, pay as you go (PAYG) withholding and superannuation is changing. The ATO will need you to report these payments directly from your payroll solution in real-time, at the same time as you pay your employees. This is known as single touch payroll (STP) and is intended to simplify business reporting obligations. It comes into effect in 2018 or 2019, depending on the size of your business.
The introduction of single touch payroll (STP) is in line with the Government’s digitisation agenda, to make reporting more streamlined, but many small businesses will feel an extra compliance burden. Those who work in remote areas of Australia may be at a disadvantage as Single Touch Payroll reporting will require a strong internet connection.
How will this change affect you as an employer?
The change to STP means that employers won’t need to complete payment summaries at the end of the year as these will have been reported in real time throughout the year. If you have a payroll solution (software that you use in order to pay employees), you will need to update this or make sure it is updated by your service provider. If you do not have a payroll solution, you can speak to us about how to find the best solution for your business. We may be able to report using STP on your behalf.
The first 12 months of STP will be considered to be a transition period, during which time you could be exempt from an administrative penalty for failing to report on time. There are other exemptions, including if you operate in an area with an unreliable internet connection or you are classed as a substantial employer for only a short period during the year (for example, if your employees are seasonal).
What are the benefits for employers?
The main benefits for employers with single touch payroll are that it will streamline the process of reporting to the ATO by being able to submit payroll information at the completion of each payroll. By doing this the ATO will be able to pre-fill the BAS for employers, eliminating potential errors and double handling. Additionally, the need to generate and distribute payment summaries may be eliminated for employees as this information will be made available online via myGov.
Finally, the ATO may allow employers to collect tax file declaration and super choice information online via myGov when onboarding new employees.
What are the risk to employers and directors of employers?
One, no doubt intended, consequence of the implementation of STP is that the ATO will become aware of the PAYG Withholding and employee superannuation liabilities of employers in real time. The ATO will no longer be dependent on the lodgement of Activity Statements by employers to identify liabilities. This may result in the ATO commencing debt recovery action in relation to the liabilities much sooner than in the past.
For directors, there may be increased risk of incurring personal liability for unpaid PAYG Withholding and superannuation liabilities via the issue of Director Penalty Notices. Directors will need to be vigilant to ensure that Activity Statements are both lodged and paid on time.
What is the timeframe?
Single touch payroll will be compulsory for employers (including those in a wholly-owned group) with more than 20 employees from 1 July 2018. If your business has less than 19 employees, you have a bit longer, but you will need to get on board by 1 July 2019, subject to legislation. If you are unsure about whether you are a “substantial employer”, the advice is to do a headcount of all of your employees who are on your payroll on 1 April 2018; a total headcount includes all full-time, part-time, casual employees, those based overseas, absent employees and seasonal employees, not just your full-time equivalent (FTEs).
Want to find out more?
If you have any queries in relation to STP or would like assistance to prepare for STP please contact your usual Hanrick Curran advisor or alternatively Tony Hunt, Matthew Beasley or Nathanael Lee on 07 3218 3900.
Please note that this publication is intended to provide a general summary and should not be relied upon as a substitute for personal advice.