Single Touch Payroll Requirements in Australia

What is Single Touch Payroll?

Single touch payroll (STP) is a reporting change for employers. Employers will be required to report payments, such a salary and wages, PAYG withholding and superannuation information, directly to the Tax Offic from their payroll software at the time they pay their employees.

STP does not change the underlying processing or taxing of payroll, but it does change what you need to report on and how often you need to report your payroll activities to the Tax Office.

When does STP commence?

The start date for STP depends on the size of your business.

For employers with:

• 20 employees or more – STP reporting starts from 1 July 2018
• 19 employees or less – STP reporting starts from 1 July 2019.
  

Your employee headcount must include:

• Full-time employees
• Part-time employees
• Casual employees who worked in the month of March 2018
• Employees based overseas
• Any employee who is absent or on leave (whether paid or unpaid leave)
• Seasonal employees.

Your employee headcount does not include:

• Independent contractors
• Labour hire staff
• Casual employees who did not work in the month of March 2018
• Company directors that are employees
• Company officeholders that are  not employees
• Religious practitioners.

What is not impacted by STP?

STP will not impact:

• the structure of any employee remuneration payments, or
• your pay cycle.

It is a reporting mechanism only for your current payroll.

Introduction and penalties

The first 12 months of STP will be treated as a transitional period by the Tax Office.

During this period, employers will be exempt from administrative penalties  for failing to report on time. Penalties can however be
administered in the first 12 months if  the Tax Office has given an employer a  written notice advising that a failure to report on time in future may attract penalties.

What else will STP do?

Over time, STP will provide some administrative benefits including:

• Employers will be able to meet their reporting obligations to the Tax Office when they pay their employees instead of running a separate process
• Details of salary and wages and PAYG withholding amounts will be pre-filled on your activity statements at label W1 and W2 (you still have the ability to adjust or amend these figures but the pre-fill lmay save you time)
• Large withholders will no longer have to report PAYG withholding on activity statements
• Employers may have the option to invite employees to complete TFN Declarations and superannuation Standard Choice Forms online
• Employers will not have to provide employees with payment summaries at year-end as the Tax Office will provide these details through the employee’s MyGov  accounts.
• Employees can access their tax and superannuation information through their MyGov account as information is reported by STP.

Deferrals

The ATO will consider granting employers and payroll software providers a deferred start date for Single Touch Payroll for up to 12 months, if they are unable to get ready by 1 July 2018 due to extenuating circumstances. You will need to provide evidence, and meet a number of requirements.

Exemptions

The ATO will also consider granting an exemption for reporting a particular employee or group of employees through Single Touch Payroll. This includes reporting for an employee of a department, agency or entity of a foreign government who is not a resident in Australia, such as a diplomat or for an employee who is not recorded in an Australian payroll system.

What should I do next?

1. Speak with your Bentleys Advisor.

Given many of our clients use software for payroll processing, the most important thing to do is talk to us to ensure you are  getting the necessary updates and payroll  solutions to smoothly transition to STP. There are already suggestions that major retail software providers will not be updating standalone software products and will be encouraging clients to move across to cloud-based versions.

We think it is critical that you know now which direction your software provider is heading in the event you may need to change products or upgrade versions prior to STP commencement dates.

2. Choose an electronic payroll solution, if you do not already have one.

If you do not have an electronic payroll solution, you will need to choose one that suits your business before the commencement date.

Unfortunately, this may force employers who maintain older versions of software to upgrade to new versions.

3. Remember to do a headcount

On 1 April 2018, you will need to do an employee headcount to determine if you have 20 employees or more. This will determine when you need to start STP.

In closing

For many employers who already use accounting software with payroll modules, there will be little change in payroll processing for you. Your main priority will be to ensure your existing payroll software is being updated to meet the STP requirements, or consider upgrading your existing version of software to a version that does meet the STP requirements.

For those not using software to process your payroll, there will be important decisions to be made at a bookkeeping and processing level for your business.

Please feel free to contact your local Bentleys office for more information.