Single-Touch Payroll (STP) has come into effect thanks to recent Australian government legislation and has led to questions on what it is as more people discover they must use it. This brief article defines the term and what the process is regarding 'PayEvents' and data sent from pay slips.
What is Single-Touch Payroll?
Some may feel the subject lends to unknown territory, but the concept is quite simple. Single-Touch payroll is when an employer submits payroll and superannuation information to the Australian Taxation Office (ATO) every 'PayEvent' using payroll software.
PayEvents are every time a payment is made to someone that generates a pay slip. Under STP the ATO receives electronically, some of the data on the pay slip. That data typically encompasses Pay as You Go Withholding tax and year-to-data totals of every employee's gross wages being paid. Something like Superannuation Guarantee Contribution (SGC) when paid, means sending superannuation payment information.
Who must use Single-Touch Payroll?
Any employer with 20+ employees must participate from 1st July 2018. These employers are regarded by the ATO as 'substantial'. Employers with less than 20 employees by headcount are given the option for now while the ATO monitors and assesses the potential benefits of using this new system. 30 April 2018 marks the start of headcount each year to determine your # of staff.
Mark the Calendar
1 July marks the day when small employers may enter Single-Touch payroll. However, 'substantial' employers must enter by 1 July 2018
How to use Single-Touch Payroll
That is easy. The software does all the work. The aim for use of Single-Touch Payroll (STP) is to make it easier for employers to report to the ATO by making payroll and reporting happen all in one place, using one software. To operate the software and send the data, one must have an internet connection.
The ATO needs an easier means of collecting important data regarding payroll. Through the software, the ATO gains greater transparency of every employer's payroll information. Such data enables earlier activity, ensuring employers pay their PAYGW tax as well as their SGC for all their employees.
Use of STP also means removing the requirement of providing payment summaries to employees. That is because the ATO should posses the data already from the software.
The data comes in handy for the ATO to pre-fill individual tax returns, because of the ongoing payroll data received.
The myGov site will provide payroll information to employees throughout the year. If for example, an employee has trouble accessing their payroll information from their employer, a simple login at myGov provides access to up-to-date information.
New employees do not have to worry about problems with their payroll and tax information. The ATO through STP, streamlines the payroll process using myGov and payroll software. Other potential avenues using STP may branch off into notifications. Providing notifications to employees when tax information is released for filing taxes or accessing payroll information through mobile apps makes payroll more convenient and easier to monitor for every employee. The process already provides expediency and quick turnaround without the additional paperwork and slow times of the paper-filled past. However, with potential avenues regarding notification and mobile apps, there may be additional ease and even faster turnaround revolving other processes.
The ATO sees an employee's payroll information all year round thanks to STP. At least for those working for 'substantial' employers as STP will be mandatory as of 1 July 2018. 'Substantial' employers are those with a headcount of 20+ employees. Small employers still maintain the option to use STP.
The reason for the recent legislation is the need for accurate payroll records. Employer payroll records represent the 'source of truth' and therefore, using STP allows for greater transparency through reporting of payroll data each time a 'PayEvent' occurs. Additionally, if any updates or fixes are needed to past pays, that information gets sent to the ATO at the next PayEvent processed. It makes the ATO's processes run smoother and the job of employers easier regarding payroll and reporting. Furthermore, employees will now have quick and convenient access to their information through myGov, making tax returns seamless.
The STP software does most of the work and with an internet connection, information is sent and reported to the ATO swiftly. Employers will no longer need to amend past reporting. As long as the payroll software remains updated, information will be reported correctly at the next PayEvent to the ATO.
Employers still must 'finalize' information for the payroll year via communication with the ATO that the data sent is the final and correct version to be used for tax returns.
Single-Touch Payroll is a great step for the future of payroll reporting in Australia. While in its infancy, it may quickly become a main tool for the ATO to collect important payroll data and keep employers transparent in their reporting.