Single Touch Payroll: What Australian Businesses Need To Know

Change is coming to Australia’s payroll landscape - how should businesses prepare for the introduction of Single Touch Payroll?

Single Touch Payroll is finally being rolled out across Australia in 2018 - with practical consequences for many employers. Despite its imminent implementation by the ATO, there’s still plenty of uncertainty in every corner of the business community over what STP actually is: although the system is being introduced in stages - from 2018 to 2019 - it’s important that businesses prepare ahead of time to avoid potential compliance issues and, worse, delays to the payroll process.

What is Single Touch Payroll?

Single Touch Payroll is a new way of reporting payroll - specifically it changes the way salaries and wages, deductions, PAYG-withholding information, and information about superannuation contributions, are reported to the ATO. Under the current system, PAYG information is submitted as part of monthly or quarterly reports, but with STP, will instead be reported when a business completes a “payroll event” - in other words, each time payroll is processed. Businesses may note that superannuation information was not previously required in payroll reports - but is, under the Single Touch system.

STP functionality should be integrated into the software platforms that payroll teams, or third-party providers, use to facilitate the pay process. As an employer, the onus is on you to ensure that your platform has STP functionality - so should contact your software provider to establish this.

Employer & Employee Benefits

The STP system represents a way for businesses and the ATO build a ‘real time’ picture of their payroll and tax affairs - and promises benefits for both sides of the professional relationship.

From an employer’s perspective, real-time update functionality will streamline the pay and tax reporting process: STP will help the ATO pre-fill business’ yearly Business Activity Statement, and it will remove the need for businesses to make annual PAYG reports. Some businesses may also no longer need to provide payment summaries to their employees - who will be able to access that information through their MyGov accounts.

Similarly, using the MyGov online platform, employees will be able to scrutinise their own tax affairs in greater detail - ensuring that they don’t face any surprises at the end of the tax year, and that they receive the superannuation they are due.

STP FAQs

When will STP be introduced?

From 1 July 2018, STP will be mandatory for employers with 20 or more employees. Employers with less than 20 employees will be required to use STP by 1 July 2019.

What preparations are required?

All Australian employers are required to conduct a headcount of employees on 1 April 2018 to determine if they need to begin reporting using STP. Employers with less than 20 employees obviously have another 12 months to prepare for STP - and some payroll providers have been given a deferral to cover further preparation time.

How will the payroll process be affected?

Although the payroll process itself won’t be affected by the implementation of STP, employers’ responsibilities will change - since they must ensure their payroll software platform is STP-enabled, and facilitates the submission of relevant data to the ATO. If STP is not enabled by your software provider (by 1 July 2018), you will have to find an alternative.

Can smaller businesses use STP before 1 July 2019?

Businesses with under 20 employees can begin using STP reporting prior to the 1 July 2019 cut-off date. Implementing STP is just a question of finding an updated software provider.

Are there penalties for non-compliance?

The ATO will impose non-compliance penalties on businesses which fail to report correctly using STP. However, an amnesty period of 12 months is in place to cover the transition period - during which the ATO will not impose an administrative penalty on non-compliant businesses.

For more information about the impact of STP, or any aspect of Australia’s tax and payroll landscape, explore activpayroll’s Australia Global Insight Guide...