Single Touch Payroll now a requirement for all Australian businesses
Single Touch Payroll (STP) has been mandatory for businesses with more than 20 employees since 1 July 2018, and now as of 1 July 2019, it will become mandatory for small businesses to report via Single Touch Payroll (STP) as well. The law was passed on 11 February 2019, requiring every Australian business to comply with Single Touch Payroll from 1 July this year.
What is Single Touch Payroll?
This government initiative mandates how businesses report their employees’ tax and superannuation information. STP is a reporting mechanism whereby each time an employer pays its employees, the employer will also send the Australian Tax Office (ATO) their payroll data from their payroll software.
The initiative is designed to streamline employer payroll reporting obligations.
Employers will continue to report and pay their employees’ superannuation entitlements through their existing SuperStream solution, however, will now be required to report employees’ super liability to the ATO each pay cycle.
What is changing?
While larger employers with 20 employees or more have been required to report via STP since 1 July 2018, small businesses with fewer than 20 employees will need to do so as well from 1 July 2019.
All Australian employers will now need to report payments such as salaries and wages, PAYG withholding and superannuation contributions electronically to the ATO directly from their payroll solutions at the same time they pay their employees. This includes the situation where payments are made to the owners of the business in the form of salary, wages or directors fees.
What employers need to report is also being extended to include certain salary sacrificed amounts.
Employers will no longer need to complete payment summaries for their employees at the end of each financial year, as the payroll information would have been reported to the ATO throughout the year.
What does this mean for small businesses?
Employers with fewer than 20 employees, who are not already reporting to the ATO via STP, will be affected by this change.
These businesses will need to use a payroll reporting/accounting software solution that is STP-enabled, so that each pay cycle they can report the following items to the ATP:
- each employee’s name and tax file number (TFN)
- gross amount paid
- tax withheld on the gross amount
- ordinary time earnings for the period, and
- any superannuation guarantee obligations.
The ATO will then report back each quarter the correct amount of PAYG tax withheld to pay in the activity statement. Each quarter there will also be information available regarding superannuation obligations to either pay the ATO clearing house or an independent provider. The reports and liabilities owing will be available to businesses in real time, meaning that employers are able to make payments towards PAYG tax withheld and superannuation contributions before the due date.
The ATO has asked software providers to provide new low-cost payroll options for micro employers (1-4 employees). MYOB and Xero have announced new $10 per month offerings (limited to 4 employees) with other software houses following suit. No penalties will be applied to mistakes, missed or late reports for the first year. Plus, if a business is in an area with no viable internet connection, such as some rural and remote regions, then exemptions may apply.
If a business is using a system which is already automated with reports that can provide the information listed above for every pay cycle, all that is needed is to confirm it is STP compliant.
What needs to be reported:
- Salary & wages
- Director remuneration
- Return to work payments to individuals
- Employment termination payments (ETPs) – not compulsory if the employee has died
- Unused leave payments
- Parental leave pay
- Payments to office holders
- Payments to religious practitioners
- Superannuation contributions (at the time the payment is made to the fund)
- Salary sacrificed amounts (from 1 July 2019).
How can Greenwich & Co help you?
We encourage business owners to be STP ready to avoid any fines or penalties from the ATO in the future.
Greenwich & Co can review your system or advise a suitable cost-effective solution for your business if required.
For any questions or to discuss any of the above in relation to your personal situation, please contact us today.