What is Single Touch Payroll?
Single Touch Payroll (STP) is a new way of reporting tax and super information to the ATO. Some payroll, accounting and business management software systems are now able to send this information to the ATO each time you run your payroll, enabling the ATO to match the most up-to-date information with their records. The ATO will eventually use Single Touch Payroll reports as the sole record of super contributions, salaries and wages paid, and tax collected.
Businesses used to report this information to the ATO once a year, but now they need to send a digital report in a specific format every pay day. Since July 1 2018, larger employers with 20 or more employees have been transitioning to this new and improved reporting system, so you may have already heard about it.
What you may not yet know, is that Single Touch Payroll will be extended to include smaller employers with 19 or less employees. This will be a gradual transition from July 1 through to September 30, 2019. However, if you are already using payroll software which offers STP (such as Xero), you can start sending reports straight away. These reports will include salaries and wages, PAYG withholding, and super information. Check the ATO’s Employer Reporting Guidelines for more details.
Why the change?
Single Touch Payroll makes things easier for businesses, and extending this system to smaller businesses will help to level the playing field. The ATO will also be able to pre-fill the BAS (W1 and W2) for employers, eliminating the double-handling errors that could result in fines for non-compliance. Payroll reporting has finally caught up with the digital age, and is the next step in streamlining your business operations.
Before Single Touch Payroll, employee data was only reported at the end of each financial year. Now your employees will be able to see their year-to-date tax and super information through their myGov accounts, with this data being updated every pay day. Under this new system, you will no longer need to provide Payment Summaries to each employee, or deliver Payment Summary annual reports to the ATO at the end of each financial year.
In short, real-time digital reporting enables greater transparency, streamlines your business accounting, reduces the risk of non-compliance, and ensures your employees are receiving their full superannuation and tax entitlements.
How will the ATO help with the change?
Although the shift to Single Touch Payroll will be a gradual and flexible transition, it will soon be a compulsory requirement for all businesses, regardless of how big or small they are. As many small business employers do not currently use commercial payroll software, real-time digital reporting means that a big change is just around the corner.
There’ll be no more paper forms for reporting your payroll activity to the ATO. Instead, you will need to submit the information online, using a specific format known as Standard Business Reporting (SRB).
The ATO understands that there will be many small businesses that need more time to implement Single Touch Payroll, so they will grant deferrals to any small employer who requests additional time to start STP reporting. Complete exemptions are also available upon application to any employers in areas with intermittent or no internet connection, as well as those experiencing hardship.
The ATO has worked with software providers to develop a number of low and no-cost reporting solutions. Low cost solutions are less than $10 per month and are available throughout the 2018-2019 financial year to employers with four or less employees. Micro employers will also be able to report quarterly for the first two years, rather than every time the payroll is run. And to give small businesses some time to get used to STP, there will be no penalties for mistakes, missed or late reports for the first year.
While making the change can be a little annoying at first, there are many upsides to automating or outsourcing this work.
Xero offers a seamless solution
Most of ABA’s small business clients enjoy the benefits of Xero, Australia’s leading online payroll provider. Xero offers a compliant payroll solution that seamlessly connects to the ATO, reduces manual errors and gives you time back to focus on the heart and soul of your business.
If you’re still using desktop software, spreadsheets, or even a pen and paper, you’ll need to find a service to convert your data into a compliant digital report format and submit it on your behalf. ABA are experts in the latest Cloud-based software solutions, so if you’re still slaving away with a pen and paper, give us a call!
Are you a small business owner?
If ABA is already managing your small business tax, a friendly specialist will be in contact with you in the next couple of months to assist with the transition. In the meantime, you can sign up for Xero’s live webinar all about using Single Touch Payroll, or chat to a professional bookkeeper about your small business accounting needs today. If you don’t already use an accountant or bookkeeper, there hasn’t been a better time to start!