Single Touch Payroll is Coming! Are You Ready?

Single Touch Payroll (STP) starts from 1 July 2018 for employers with 20 or more employees and will be expanded to include employers with 19 or less employees from 1 July 2019.

STP is a reporting change for employers. Essentially, STP requires that each time an employer pays their employees, they will have to instantly report to the ATO information such as the salaries and wages, pay as you go (PAYG) withholding and superannuation. The information will need to be reported from software which is a Single Touch Payroll (STP)-enabled payroll solution.

Eventually, the purpose of STP is so that:

• Employers will not need to provide payment summaries to their employees for the payments reported through STP;
• Employees will be able to view their payment information in ATO online services, which they will access through their myGov account;
• Some labels on Activity Statements will be pre-filled with the information already reported.

Overall, STP will provide greater transparency of information to the ATO and employees alike which is expected to lead to greater compliance by employers with their tax and superannuation obligations.

Here is a little step-by-step guide as to what will be needed by businesses to transition over to STP:

Step 1: Determine the STP start date for your business

STP starts from 1 July 2018 for employers with 20 or more employees and will be expanded to include employers with 19 or less employees from 1 July 2019.

The “headcount” of employees (for the purposes of determining the STP start date) is 1 April 2018.

“Employee” for STP headcount purposes is the common law definition of employee. Therefore, workers who an employer does not withhold PAYG from will generally not count towards the 20-employee threshold. Also not included in the count are staff provided by third-party labour-hire, office-holders and directors of companies, casual employees who did not work in March 2018, independent contractors and religious practitioners.

Step 2: Check that your Payroll Systems will be STP-enabled by the required start date

Employers using accounting software to process their payroll should:

• Make enquiries of the software provider as to their STP-readiness. The main software providers in the Small-to-Medium (SME) business space (Xero, MYOB, Reckon, Intuit) are all working toward the 1 July 2018 deadline, but if you are using other software providers, it will be worth checking their readiness or whether in fact they have sought a deferred start date for their product. If so, they will have an ATO-issued deferral number, and will be able to tell employers when they are deferred until.
• Find out what support the software provider will offer to transition to STP.
• Subscribe to their updates and communicate with your bookkeeper or accountant in relation to being ready for when the STP start date arrives.

If your business is not using accounting software of any kind and you have employees, then it is time to get computerised by seeking assistance from a bookkeeper or accountant.

Employers in remote areas where internet connections are unreliable may be able to apply to the ATO for an exemption.

Step 3: Review Payroll Processes

STP will offer greater visibility of your payroll to the ATO and other government agencies. Now, more than ever before, it is crucial that all aspects of payroll are being done right.

The introduction of STP is a great reason for performing an overall review of payroll processes by:

• Checking HR practices and procedures.
• Checking employees are being paid correctly.
• Checking that employee superannuation entitlements are being calculated correctly.
• Checking that employee leave entitlements are being correctly dealt with
• Checking compliance with any applicable industrial awards and compliance with the Fair Work Act 2009 and associated amendments.
• Checking that overpayments are being addressed correctly
• Checking that employee information is accurate, including names, addresses and date-of-birth records.
• Checking that sensitive information (such as Tax File Numbers) is being properly safe-guarded.
• Making sure the right people in the business know about Single Touch Payroll and what is required to comply – especially the payroll staff.

Step 4: Educate Employees

STP is part of an overall plan to get businesses to move away from paper-based payroll processes.

For employees to realise the benefits from these changes, they will need to be able to access their key payroll information online in real time, and year-to-date pay and superannuation contributions via a myGov account.

If you are using accounting software, check that you are fully utilising any aspects of the software that provide online access to information for employees, and that employees are trained on how to do so. Also encourage employees to familiarise themselves with myGov and to create an account if they have not already done so.

How Your Bookkeeper or Accountant Can Help

1. They can assist in determining which workers need to be counted in the 1 April 2018 headcount
2. Assist in determining the STP-readiness of your software provider
3. Assist in the computerisation of the payroll process if your business does not utilise accounting software of any kind
4. Review your payroll processes to ensure they are sound and the correct information is set up for reporting purposes
5. Advise on the extent to which you are utilising the available features within your accounting software for the online reporting of information to employees

If you require further assistance with getting your business and payroll processes STP compliant then contact us via email at michelle@beaglebookkeeping.com.au or phone 0419 22 00 57 to see how we can help.