By now you’ve probably heard about Single Touch Payroll (STP). Many of you have already hopped aboard the Automation Train, destination: Compliance.
The ATO released a great article that breaks down exactly how STP works. Basically, it works by sending tax and super information from your payroll or accounting software to the ATO as you run your payroll. Wait, what…. I’m going to have to change the entire way I do my payroll? Panic stations people!
Don’t worry, you will run your payroll as normal, still give your employees a payslip and your pay cycle won’t be affected either. Once you’ve paid your staff, your STP enabled payroll software will send the ATO a report which includes all the information they need from your business automatically. Salaries, wages, PAYG, super information will all be included in this report. Good times, right?
Once the ATO receives this information, they will match the STP information to their employer and employee records. This means that your employees will be able to see their year-to-date tax and super information in ATO online services. Making it a much easier way to allow your employees to self-serve and have a better insight into their payments.
They can access this at anytime, and it’s updated everytime you send the ATO a report (so every pay cycle). Before this, employee payment data was only reported on at the EOFY.
We know, we know. It’s all pretty complicated. For those of you who are still a little unsure about the whole thing, we pulled together this ultimate guide with all the information you need to know about STP!
What is Single Touch Payroll (STP)?
Single Touch Payroll (STP) legislation requires employers to report wages, PAYG withholding, and superannuation information directly to the ATO using an online payroll system. It was introduced by the Australian government in 2018 as a way to encourage small businesses to be more compliant in the way they report superannuation or PAYG instalments to employees.
Whilst it might seem annoying, STP is great for Australians. It helps to keep black market criminal activity at bay, making Australia a stronger and fairer place for all.
When Did STP Begin?
Here is a Single Touch Payroll Timeline we produced back in April 2018 when STP rules and regulation first started rolling out for companies with 20+ employees.
It started affecting businesses with twenty employees or more who had to be ready to implement the new processes by 1 July 2018. If you had less than 20 employees, then companies had until 2019 to get ready.
From this initial update we reviewed STP 12 months on.
The 2019 Update
2019 soon rolled around. Time flies when you’re having STP fun…
Single Touch Payroll (STP) reporting is now compulsory for small businesses (those with 20 employees or less) from July 1, 2019.
As we’ve covered, STP has been compulsory for employers with over 20 employees since July 1, 2018 – but now it’s time for everyone to get involved.
July 1, 2019, was always the date earmarked for compulsory STP reporting by smaller businesses, a timeline that was made a reality earlier in the year when the government passed supporting legislation.
There are caveats in place to help businesses make the transition so do not panic if you are in no way STP ready!
4 Things You Need to Know About Single Touch Payroll
- For companies with 19 or fewer employees, you need to start reporting from 1 July 2019.
If you’re a large employer with 20 or more employees, you should now be reporting through STP, or have applied to the ATO to start reporting at a later date. For smaller employers with 19 or fewer employers, you need to start reporting through STP from 1 July 2019.
Thankfully the government has allowed for a grace period and you’ll have until 30 September 2019 to get your processes in check. If for whatever reason you’re unable to up and running with STP by the end of September, you’ll need to apply for a deferral or an exemption.
2. If you have one to four employees, explore your options
For companies with four or fewer employees, you can choose a no-cost or low-cost solution when one is available. These solutions have been made for micro employers who need to report through STP but do not currently have STP ready software.
Solutions include mobile apps, simple reporting solutions and portals. You can find more information at ATO’s no-cost and low-cost Single Touch Payroll solutions page.
3. There will be no penalties for mistakes, missed or late reports for the first year
This one is pretty self-explanatory but the ATO understands that there is a required adjustment period. The most important thing is that businesses simply start reporting through STP.
The Commissioner Chris Jordan made a statement regarding this, “I want to reassure small business and give my personal guarantee that our approach to extending Single Touch Payroll will be flexible, reasonable and pragmatic…There will be no penalties for mistakes, missed or late reports for the first year.”
You can read his full statement on the STP transition for small employers here.
4. You are required to report a pay event to the ATO on or before the employees’ payday
Something to note is that you’ll be required to report a pay event to the ATO on or before the employees’ payday. Additionally, you must report the year-to-date values of gross salary or wages, allowances or other payments (as relevant) deductions and PAYG withholding for each employee included in that pay event.
Some other hot tips:
- All payees must have either a Tax File Number (TFN) or Australian business number (ABN)
- You’re allowed to lodge multiple pay event files for the same day
- If you make an employment termination payment (ETP) you must report it in a pay event on or before the day you make the payment
If you’d like to learn more about what you can expect with the approaching EOFY and STP deadlines, watch our handy webinar with Payroll Specialist, Ray Ali.
How Employment Hero Can Help – A Quick Look At STP Ready HeroPay
We know STP has been a tense long journey over the last few years, especially to payroll managers and accountants, but we’re nearly there. Stay strong guys.
If you’re using HeroPay Payroll, then STP compliance will be automatically rolled out for you. At Employment Hero, we have been working hard to implement STP to meet the ATO’s specifications and this blog will give you all the insights you need on how it works.
What To Consider To Get Single Touch Payroll Ready (if you are not using HeroPay):
If you’re unfortunate enough to not be fully integrated with Employment Hero and HeroPay (if you’re not, then why not?) here are some other things to consider to get Single Touch Payroll ready:
1. Select your Single Touch Payroll Champion
Choose someone to be the STP expert in your business. They can help by being responsible for managing the change and ensuring the business is up-to-date. (plug: HeroPay!)
2. Start to put the key ATO processes in place
Visit the ATO website and make sure your business has:
We’ve also published a list of handy hints to start getting ready for STP.
3. Check your data
Now is a great time to check your data is correct in the following areas:
Check PAYG withholding is calculating correctly and all the information captured is correct.
Check your superannuation contributions are calculating correctly, your SuperStream solution is compliant and you have the correct employee and superannuation funds set up.
- Employee master files
It’s crucial that payroll records match the ATO. Ensure employee data is up to date and correct (such as full name, address, tax file number and date of birth)
4. Review your business processes
As well as double-checking your data, it’s also a good time to double-check your processes.
- Make sure the right people in your business know about STP – especially your payroll staff.
- Check if you are paying your employees correctly.
- Check if you are addressing overpayments correctly.
TIP: You will not need to provide payment summaries to your employees for the payments you report through STP.
Employees will be able to view their payment information in ATO online services, which they will access through their myGov. Your employees can also request a copy of this information from the ATO.
To be exempt from giving payment summaries, you will need to make a finalisation declaration.
Under STP, there are a number of withholding payments that are either mandatory, voluntary or that cannot be reported. Visit the ATO website so you know how to handle these types of payments and ensure that you have processes in place to deal with these obligations.
5. Communicate these changes to your employees
STP has been designed to help create transparency and make life easier for your employees. To unlock the full potential of STP, they will need to take a few steps too. Talk to your employees about:
- Registering on myGov. Step-by-step instructions can be found on the Department of Human Services website and they can access a range of government services.
- Provide helpful hints of what they’ll need to set up on myGov like their TFN and bank account details. This can add real value to their experience and help speed up the process.
- Put managers through the process first so they can help their teams and reduce the effort involved.
We recently ran a live webinar on Being Single Touch Payroll Ready, which you can watch on-demand here.
Have more questions about STP?
If there’s anything we’ve missed, allow us to direct you to even more information about Single Touch Payroll.
- Click here to learn more about STP.
- Click here to learn about how to make your business STP ready.
- Click here to have frequently asked STP questions, answered.
There’s no doubt that Single Touch Payroll will change the payroll landscape in Australia.
As illustrated in this article by the SMH, more businesses are going to move to digital solutions due to STP requirements. While this might require a small time investment at first, digital payroll solutions ultimately reduce administration time and greatly reduce the chances of error.
Systems like our very own HeroPay (cough, cough) also automatically interpret modern awards.
The Australian payroll system is incredibly complex, with more businesses using smarter solutions, we hope to see a decrease in the payroll scandals that regularly feature in our news feeds.
Want even MORE advice on making sure your business is being compliant?