Payroll is one of the single most important aspects of running your business. If you aren't handling payroll correctly, employees may not get paid as they should, which can pose serious problems for you.
There are new changes in terms of how payroll is reported to the Australian Taxation Office, which will take place as of 1 July 2018. Understanding how this impacts you and the pros and cons, it will make it easier for you to handle payroll without any major complications to your operations.
Various payroll software programs will provide updates regarding single touch payroll, too – and if you use a particular program, start looking for that update.
What is Single Touch Payroll?
There's a change in how payroll is reported, coming from the ATO, known as Single Touch Payroll. STP will impact employers who have 20 employees or more, at least to start.
Each time you pay your employees, you'll need to report various payments:
- Salaries and wages
- Superannuation information
- Pay-as-you-go withholdings
One of the important changes to note is the fact that you will have to send everything directly through your payroll solution. This means that you're touching payroll once – not sending multiple forms and touching payroll dozens of times.
If your payroll solution is ready, you don't have to wait until 1 July. However, it's critical that you're ready to go by 1 July if you have at least 20 employees on your payroll.
Even if you have less than 20 employees, this will ultimately impact you. The Australian Taxation Office will be expanding single touch payroll to include employers with fewer employees as of 1 July 2019.
The best thing for you to do is count the employees currently on your payroll as of right now. Do you need to be ready by 1 July 2018 or 1 July 2019? Either way, it's important to prepare.
Counting Your Employees
You need to establish a headcount for your employees to get started.
"Substantial" employers are those who have 20 employees or more on their payroll as of 1 April 2018. Additionally, if the employer is a member of a wholly-owned group who employs at least 20 employees, they're identified as a substantial employer.
Who is counted?
- Part-time employees
- Casual employees
- Overseas-based employees
- Employees on paid or unpaid leave
- Full-time employees
Who isn't counted?
- Independent contractors
- Company directors
- Staff provided by a third party labour organisation
- Casual employees who didn't work in March 2019
- Employees who were no longer employed before 1 April 2018
The count does not have to be submitted to the ATO, so the count can be done individually within your company for your own personal records.
This means that you have a decision to make: To report or not to report.
As of 1 July 2018, you have to start using Single Touch Payroll if you have 20 employees or more. If you have fewer than 20, you can still report. You are simply choosing to do so voluntarily.
It's a good idea to start reporting as soon as possible, regardless of how many employees you have. Since it's going to be a requirement for all employers by the middle of 2019, it's best to prepare right away.
What are you using for payroll?
Your payroll solution needs to be able to encompass single touch payroll. They should provide you with an update once it's ready to go. If you aren't using any kind of advanced payroll solution, you need to consider how you are going to comply with the ATO requirements.
We have a few recommendations for you:
- Review your system to ensure that PA YG withholdings and superannuation configurations are accurate
- Review wage component configurations to ensure that they are aligned with ATO payments
- Align calculations performed externally so that they will be captured
There may be a few adjustments to be made to your existing processes, too. For example, there may need to be adjustments to payroll during on-boarding.
Adhering to STP doesn't have to be an overwhelming process. The ATO already announced that they don't expect all software providers to be STP-ready by the 1 July 2018 deadline. It's possible for software providers to apply for a Deferral Reference Number. Additionally, it's also possible to work with a bookkeeper who can process your payroll on your behalf – and adhere to STP requirements.
At Eye on Books, we understand the implications of Single Touch Payroll and already use payroll software solutions that are compliant.
Not sure how to process payroll for your employees while being compliant with the ATO? Regardless of whether you're a substantial or non-substantial employer, we can help.
Call us at Eye on Books for all of your bookkeeping services. We're here to help you get back to your business by providing you with payroll services and much more.