Payment Summary or Income Statement? Find out here.
What is STP?
Single touch payroll, aka STP, is the process of submitting each and every pay run to the ATO using payroll software like Employment Hero Payroll, Xero, MYOB or KeyPay.
Almost all Australian organisations should be using STP by now. The exception is organisations with closely-held employees, who don’t have to use STP until 1 July 2021 (though you can choose to do so now).
What is a closely-held employee?
A closely-held employee is someone who is directly related to the business, company or trust that pays them, including:
- family members of a family business
- directors or shareholders of a company
- beneficiaries of a trust
If you aren’t using STP for closely-held employees, you need to issue them with a payment summary. For more information on closely-held employees, click here.
What is a finalisation event?
At the end of the financial year, you need to submit a finalisation event to the ATO. This tells the ATO that you have paid everyone for the financial year and there will be no more pay runs. As a result, the ATO can start calculating how much tax is now owed by your employees (among other things).
When is the finalisation event due?
Finalisation events for companies with 20 or more employees were due on 14 July 2020. If you haven’t submitted your finalisation event yet, apply for a deferral ASAP!
Organisation with less than 20 employees have until 31 July 2020.
Do I have to provide my employees with a payment summary?
If you have been using STP for the entire financial year, you are not required to provide a payment summary to your employees. Instead, your employees will need to sign in to their myGov account to download their income statement (or statements if they have more than one employer).
What is an income statement?
An income statement is almost identical to a payment summary. It includes a summary of all the income, tax and super information from the previous financial year. The only difference is that instead of receiving this from an employer, employees now receive this from the ATO via myGov.
What if one of my employees doesn’t have a myGov account?
If an employee doesn’t have a myGov account, they can create one following these instructions.
If an employee doesn’t want to create a myGov account, they will need to contact the ATO directly to receive their income statement or statements.
How will my employees know when their income statement is tax ready?
After your organisation’s finalisation event has been accepted by the ATO, the ATO will notify your employees via their myGov inbox that they are Tax Ready. If you are applying for a deferral, advise your employees that their income statements may be delayed.
If you are not applying for a deferral, we suggest that you notify your employees when you submit your finalisation event that their income statement will be ready soon. Here’s a template you can use.
My organisation hasn’t been using STP for the full financial year. Do I need to provide payment summaries?
Perhaps. There are few variables to consider, so we suggest you check out the ATO’s website regarding transitioning to STP in the middle of a financial year.