Single Touch Payroll (STP) is an ATO compliance regulation that requires employers to send employee payroll information including salary, wages, PAYG withholding and superannuation to the Australian Tax Office (ATO) at the same time as their standard pay run.
This is a significant change, for small business in particular, that will require many employers to upgrade or replace their payroll system in order to meet their reporting obligations.
Last month, the Australian Government officially passed legislation to expand Single Touch payroll to all employers. This is being done in two phases:
- Phase 1: Single Touch Payroll became mandatory on 1 July 2018 for all employers with 20 or more employees,
- Phase 2: Single Touch Payroll will become mandatory for employers with 19 or less employees from 1 July 2019.
The ATO has announced special rules for STP micro employers (1-4 employees), to help them transition more easily into the new regime. Micro employers who engage a registered tax or BAS agent will be able 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 up to 30 September 2019. The ATO will also grant deferrals to any small employer who requests additional time to start reporting.
So how will it be different?
Previously, small businesses finalised their payroll records at the end of the financial year and produced a payment summary annual report for the ATO, outlining how much had been paid in salary or wages, the PAYG withheld, and any superannuation contributions they’d made along with a payment summary for each employee.
With Single Touch Payroll, the payment summary annual report and the payment summary will no longer exist. You will no longer need to send the ATO your annual report; simply advise them when you’ve made your last pay run of the financial year.
Similarly, you will no longer need to provide your employees with payment summaries. The STP will now be used by the ATO as the sole record of salary/wages, taxed and superannuation. Employees will be able to see their payment summary, which will now be called an ‘income statement’ by logging on to the myGov website.
When you start reporting
You will need to report your employees’ tax and super information, on or before each pay day, using your STP-enabled payroll software.
You will need to do a finalisation declaration at the end of the financial year. The information you report through STP will not be tax-ready for your employees or their registered tax agent until you make this declaration.
Superannuation will change as well. As an employer, you will now report your employees’ super liability information through STP. Super funds will then report to us once you have paid the super amount to your employees’ chosen fund.
It is your obligation as an employer to make sure employees know they will be reporting through STP. The ATO has issued a fact sheet for employees that you might want to share with your staff.
But I don’t use payroll software.
With many small businesses and other small employers not using commercial payroll software, the ATO has also advised they will not be required to purchase such software to report under STP. A list of software providers who have developed low and no-cost reporting solutions including simple payroll solutions, portals and mobile apps has been published at ato.gov.au/stpsolutions.
There will be no penalties for mistakes, missed or late reports for the first year, and the ATO will allow exemptions from STP reporting for employers experiencing hardship, or in areas with intermittent or no internet connection.
How can I get ready for the change?
- Make sure you can submit compliant reports every payday.
- If you use online payroll software, it should be able to manage STP – check it can produce ATO-compliant reports?
- If you use desktop payroll software, you’ll need to look around for 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 pen and paper, you’ll need to engage a service that will convert the data into a compliant digital report format and submit it on your behalf.
For more information about STP on 13 28 61 or at ato.gov.au/stp.