Currently, large employers (with 20 or more employees) have been required to use the Single Touch Payroll (STP) process from 1 July 2018. The STP process is a way of sending employees’ tax and superannuation information to the Australian Taxation Office (ATO) at the time employers process their payroll.
However, from 1 July 2019, the STP process will be extended to include small employers with less than 20 employees.
Below is what small employers must know about STP.
Therefore, STP will now extend to all employers and is intended to ensure that all employees receive their full superannuation entitlements. STP will also offer greater transparency, faster streamlining business reporting, as well as the ATO being better informed whether employers are complying with their PAYG (Withholding Tax) and superannuation guarantee obligations.
How STP works
Tax and superannuation guarantee obligations are sent to the ATO from the employees’ payroll or accounting software when the business runs its payroll process in the following steps:
Employees are paid and receive payslips as usual (Employer’s pay cycles do not need to change).
Employer’s STP-enabled software will send a report to the ATO, which includes information on the employee’s salary and wage, PAYG(W) and superannuation guarantee obligations.
Superannuation funds will also be required to report to the ATO and inform about the employer’s payments to the employees.
Employees will be able to see their year-to-date tax and superannuation information through their myGov account.
By reporting through STP, employers need not complete payment summaries at the end of the financial year, because payment summaries will be available to employees through myGov.
The ATO systems will match the STP information to employers’ and employees’ records.
The ATO’s policy regarding STP changes
Implementing STP and lodging reports may take some time for small employers and the ATO will assist by:
- Offering micro employers (with 1 to 4 employees) help to transition to STP and other alternative options (for example by allowing those who rely on a registered tax or BAS agent to report quarterly for the first two years, rather than each time the payroll is run);
- Allowing for small employers to start reporting any time from the 1 July 2019 to 30 September 2019 and granting deferrals to any small employer who requests additional time to start STP reporting;
- No penalties will be charged for mistakes and late reports for the first year; and
- Providing exemptions from STP reporting for employers experiencing hardship, or in areas with intermittent or no internet connection.
Employers may need to choose new payroll software if their current software does not offer STP reporting. The ATO recommends that employers speak with their registered tax agent/accountant (Nexia) to establish which software product best suits their needs.
The ATO has requested software developers to build low-cost STP solutions at or below $10 per month for micro employers – including simple payroll software, mobile phone apps and portals. A list of suppliers who intend to develop low-cost STP solutions are available on the ATO’s website. Currently nine software companies offer low-cost STP solutions which are time efficient to complete the STP report for each pay period and which will not require the employer to maintain the software. Another twelve software solutions are currently being developed. Please note that according to the ATO website, the register of suppliers does not include all commercial STP-readily available software and future changes in the register may occur.
For assistance with payroll, tax and superannuation obligations, please speak to your Nexia Advisor.