Single Touch Payroll (STP) is a payroll reporting initiative implemented by the Australian Tax Office (ATO) as part of the Budget Savings Act 2016. Introduced into Parliament on 31 August 2016, the Omnibus bill received Royal Assent on 16 September 2016 and employers were granted access to the platform 1 July 2017. STP will be fully implemented and mandatory for employers of all sizes on 1 July 2019.
What Is STP?
The most significant payroll reporting change in Australia's history, the new legislation streamlines employers reporting of salary or wages, pay as you go (PAYG) withholding and superannuation information to the ATO. Under Single Touch Payroll, employers will need to report employee payments electronically to the ATO at the same time they pay their employees.
STP is a simpler way to report employee payroll information, providing real-time visibility of the accuracy and timeliness of an organisation's payroll processes. The new legislation requires the upgrading of all payroll processing systems to accommodate a direct digital connection to ATO.
Who Does STP Affect?
While the first year of the new STP reporting requirements will be a transition period and penalties may not apply, the new legislation will eventually affect all employers. The implementation of the STP platform will occur in two steps:
- 1 July 2018 - Substantial organisations, those with 20 or more employees, begin reporting.
- 1 July 2019 - Non-substantial organisations, those with 19 or fewer employees, begin reporting.
The organisation's size as of 1 April 2018 determines reporting requirements and when an employer is required to comply with the compulsory switch. It is vital for employers to have an accurate count of the number of employees on the payroll at the beginning of April to determine substantial or non-substantial employer status.
STP requires the inclusion of the following types of employees in the count:
- full-time employees
- part-time employees
- employees based overseas
- casual employees on the payroll 1 April who worked any time during March
- employees that are absent or on paid or unpaid leave
- seasonal employees
Employees who terminated employment before 1 April, independent contractors, third-party labour hires, casual employees who did not work in March, and company officials are exempt from the headcount.
With just a few months left before implementation, it is essential for organisations to consult with payroll software providers to ensure their STP solution is ready when needed. While many providers have addressed and made the necessary changes to comply with the legislation, others are still in the process. The ATO is working with organisations to ensure that the transition to STP is smooth, but ultimately the responsibility for compliance with the new regulations lies with employers.
STP - Pros
STP will benefit employers by streamlining the process of submitting information to the ATO by allowing organisations to report payroll data when completed. Real-time data reporting enables the ATO to pre-fill an employers business activity statement (BAS) eliminating the chance of errors and the loss of time associated with the repeated entry of data.
The new requirements may eliminate the need to generate and distribute payment summaries to employees at the end of the financial year for certain payments reported through Single Touch Payroll. The ATO will make this information available to employees online through the myGov website. In addition to having access to end-of-year payment summaries, STP will enable employees to check year-to-date information.
STP simplifies the onboarding and termination of employees with the ATO allowing start dates and tax file number declarations, as well as cessation dates, to be reported through payroll events. The platform may also offer an option to use a new simplified, pre-filled employee start method through the myGov website.
STP - Cons
The new regulations will cost many employers, especially those that perform payroll in-house and do not currently use a software-based payroll system. Organisations that have a payroll service now will need to invest the time necessary to ensure that the current system will be STP enabled and compliant at the appropriate time, or take the steps required to ensure compliance.
The successful implementation of the STP program relies, in part, on the willingness of employees to set up an on-line myGov account to view their information, which creates an additional level of administration and bureaucracy. Creation of a myGov account for tax purposes means that all future tax-related information is routinely sent to the online account, rather than by regular post. The change to electronic transmission of tax-related documents may cause issues for employees with limited access to technology, especially if the employee has a tax agent who will be required to obtain these documents from clients.
Navigating the changes that STP requires and ensuring that your organisation is compliant with the new regulations will necessitate a careful analysis of current payroll processes. While new payroll legislation may present a challenge to employers, a full-service bookkeeping service like Eye on Books can provide a quality solution while eliminating the stress and worry associated with new regulations.
The experienced professionals at Eye on Books will develop customised services to address the needs of your organisation, and have the Single Touch Payroll software solutions to ensure compliance of both substantial or non-substantial employers. To learn more about STP requirements or anything else contact us today.