Legislation Makes Single Touch Payroll Mandatory for all Australian Businesses

Small businesses across Australia should take steps to adjust to the imminent Single Touch Payroll deadline.

Australia’s Single Touch Payroll (STP) system first rolled out in July 2018 to businesses across the country. The new system of payroll reporting was previously only mandatory for businesses with more than 20 employees but, in February 2019, legislation passed the Australian Parliament which extended STP requirements to all businesses in Australia: in other words, to those with less than 20 employees. The legislation - Treasury Laws Amendment (2018 Measures No. 4) Bill 2018 - should receive Royal Assent in March 2019.

What is ‘Single Touch Payroll’?

Single Touch Payroll is a tool designed to streamline the payroll reporting process for both employers, and the Australian Taxation Office (ATO).

In more detail, STP introduces a digital functionality for businesses to report PAYG-withholding, superannuation contributions, deductions, and other salary and wage information, to the ATO every time a ‘payroll event’ occurs - essentially, each pay-day. STP is integrated into payroll software and sends data electronically to the ATO. Using that data, the ATO will be able to build a ‘real time’, up-to-date picture of a business’ tax profile, cut down on time-consuming regulatory red-tape, and pass the efficiency benefits onto employers.

The New STP Legislation

Introducing STP requirements for businesses with less than 20 employees has been on the agenda since 2018 - and the new laws were passed by the lower house on 12 February 2019. By expanding the scope of the regulations, over 700,000 small businesses are projected to join STP - a move estimated to create around $1.3 billion for the Australian economy.

With over 40,000 Australian businesses already using STP in February 2018, the government is delivering on its ambition to shift payroll towards a completely digital landscape - and the efficiency and connectivity benefits that entails. Beyond that, is the aim of enhancing tax compliance and eliminating nefarious tax practices across the country “by aligning payroll functions with regular reporting of taxation and superannuation obligations.”

Preparing your Business for STP

Businesses in Australia must be compliant with STP regulations by 1 July 2019.

If your business hasn’t already integrated, or begun preparations to integrate, Single Touch Payroll, now is the time to do so. Since STP is a function of the payroll software that businesses use to deliver pay each month, employers should consult with their IT departments or their payroll providers to ensure they are in compliance with regulations. STP is only a reporting mechanism so shouldn’t affect the way pay is processed and delivered to employes - but under the new system, employers will have to authorise STP reports to the ATO.

The ATO has issued guidelines for businesses preparing for STP. The ATO has also previously stated it is ready to help businesses which are struggling to integrate STP into their payroll infrastructure. Commissioner, Chris Jordan has talked about granting deferrals for “those people that don’t yet have an effective internet connection” - and has also raised the possibility of offering exemptions until STP integration is possible.

For more information on Single Touch Payroll and the Australian tax system, check out activpayroll’s Global Insight Guide to Australia.

To discuss how activpayroll can assist your business with a seamless transition to electronic payroll processing and STP reporting, contact our Australian Operations Manager, Melanie Gaensler melanie.gaensler@activpayroll.com  +61 6280 0176.