Small businesses face significant changes as Single Touch Payroll deadline looms

Do you employ people? Then the way you pay your employees is set for a technological shake up. The ATO is instituting a Single Touch Payroll system which requires all businesses to report tax and super information using specific software each and every time you pay an employee.

You only have a few months to make sure your payroll software is up to date.

What is Single Touch Payroll?

Single Touch Payroll is the ATO’s means of streamlining payroll reporting. It allows businesses to manage their reporting more efficiently and allows the ATO to keep a closer eye on pay and entitlements.

How does it work? Each time you pay your employees, you will report the tax and super information from your Single Touch Payroll (STP)-enabled payroll solution directly to the ATO. This can be done through your existing payroll software as long as it is updated to offer Single Touch Payroll reporting.

  • Will I need to utilize this STP-enabled software every time I pay an employee? Yes. You will send your employees’ payroll and super information to the ATO from your payroll solution each payday.
  • Will my payroll cycle change? No. You can still pay your employees weekly, fortnightly or monthly.
  • Will my due dates for PAYG withholding and super contributions change? No, but you can opt to pay earlier.

Essentially, the ATO is requiring all businesses to manage payroll through this STP-enabled system and software.

When does it start?

Soon. If you have 20 or more employees, you will need to report using Single Touch Payroll enabled software from 1 July 2018. If you have 19 or less employees, you will need to be ready to report by1 July 2019 (subject to legislation being passed in parliament).

The staff headcount needs to include full time employees, part time employees, casual employees who are on your payroll on 1 April and worked at any time during March, employees based overseas, any employee absent or on leave (paid or unpaid), and seasonal employees.

What practically will change?

You will need to be ready use STP compliant software by the above deadlines. Once this has been set up, you will need to use it each and every payday.

This means that before or on each payday you will report the following to the ATO via your STP software: employee salaries and wages, PAYG (pay as you go) withholding, and superannuation information.

Once you start using this software on payday, the information you provide about your payroll is planned to be used to prefill your activity statement. You most likely won’t need to provide payment summaries to your employees, and your employees will view their year-to-date tax withheld and superannuation through MyGov.

How do I make sure I meet the deadline?

The following steps will guide you through the adjustments you need to make to meet the deadline.

  1. Do you use any payroll software currently? Then first and foremost check with your software provider whether or not this software will be compliant with STP by the 1st of July.
  2. If your current payroll software will be compliant by this deadline, then you need to ask your software provider whether you will need to upgrade your payroll software version, and how to do so.
  3. If your current payroll software will not be compliant by this deadline, then you need to ask your software provider if they are applying for a deferral.
  4. Once you have asked these questions, you can then determine whether your current payroll software is competent enough to meet the new STP requirements by the looming deadline.
  5. You then need to consider compatibility. For example, if you use one software product for payroll and another to record timesheets, you would normally import timesheet data from your timesheet software to your payroll software.  Can you still do this when your payroll software is upgraded to be STP-enabled? Will you need to change the way you use other software, or upgrade this other software altogether?
  6. Do you not currently use adequate payroll software? If you lack sufficient IT and accounting resources, then you will struggle to be compliant in the coming months before the July deadline.

The ATO also has a checklist which can help you determine if you are well-prepared for the necessary changes.

Can I seek assistance to be STP ready?

The urgency of the deadline and the impact on your day-to-day business practices can cause some businesses concern. It may be an opportune time to seek expert assistance.

First of all, contact your software provider. Work through the above questions with them. Also, do a bit of research on the ATO website about Single Touch Payroll and your obligations.

If you still do not feel confident about your current payroll software and its capacity to meet Single Touch Payroll changes, then it’s time to call your business advisor or tax accountant. They can help you select the right software in time, and can also report your regular payroll on your behalf as your agent.

Important Disclaimer: Readers should not act solely on the basis of the material on this page. Items herein are general comments only and do not constitute or convey advice. Legislation and proposals of legislation are also subject to constant change. We therefore recommend that formal advice be sought before acting in any of the areas. This news article is issued as a guide to the readers. Calibre Business Advisory Pty Ltd and its associated entities disclaims any losses that may be incurred as a result of the reader undertaking any action based on this article.