If you are an employer the way you report payments, such as salaries and wages, pay as you go (PAYG) withholding and superannuation will be impacted by Single Touch Payroll.
Businesses who employ 20 or more employees, should have implemented Single Touch Payroll from 1 July 2018. Those who employ 19 or less employees now is the time to get prepared with the 1 July 2019 commencement date fast approaching.
What is Single Touch Payroll?
Single Touch Payroll (STP) is a new way to report your employees’ payroll information to the Australian Taxation Office (ATO). STP will report payments such as salaries and wages, pay as you go (PAYG) withholding and superannuation in real-time directly from your payroll solution (software that you use in order to pay employees).
You are required to use STP from 1 July 2018 if you employed 20 or more employees on 1 April 2018. Directors and office holders are not included in the headcount. If you have 20 or more employees as at 1 April 2018, you are required to use STP effective of 1 July 2018, even if your employee numbers subsequently drop below 20. If you have multiple entities in your business group, you must include the total number of employees employed by all members of the group.
If you have 19 or less employees you are required to use STP from 1 July 2019.
How will this change affect you as an employer?
The change to STP means that employers won’t need to complete payment summaries at the end of the year as these will have been reported in real time throughout the year. If you have a payroll solution, you will need to update this or make sure it is updated by your service provider. If you do not have a payroll solution, you can speak to us about how to find the best solution for your business. We may be able to report using STP on your behalf.
The first 12 months of STP will be considered a transition period, during which time you could be exempt from an administrative penalty for failing to report on time. There are other exemptions, including if you operate in an area with an unreliable internet connection or you are classed as a substantial employer for only a short period during the year (for example, if your employees are seasonal).
What are the benefits for employers?
The main benefit for employers with single touch payroll is that it streamlines the process of reporting to the ATO as employers are to submit payroll information at the completion of each pay run. By doing this the ATO pre-fill the BAS for employers, eliminating potential errors and double handling. Additionally, the need to generate and distribute payment summaries is eliminated as this information will be made available to employees online via their myGov accounts.
The ATO will also allow employers to collect tax file declaration and superannuation choice information online via their myGov accounts when onboarding new employees.
What are the risks to employers and directors of employers?
One, no doubt intended, consequence of the implementation of STP is that the ATO become aware of the PAYG Withholding and employee superannuation liabilities of employers in real time. The ATO will no longer be dependent on the lodgement of Activity Statements by employers to identify liabilities. This will result in the ATO commencing debt recovery action in relation to the liabilities much sooner than in the past.
For directors, there may be increased risk of incurring personal liability for unpaid PAYG Withholding and superannuation liabilities via the issue of Director Penalty Notices. Directors need to be vigilant to ensure that Activity Statements are both lodged and paid on time.
Want to find out more?
If you have any queries in relation to STP or would like assistance to prepare for STP please contact your usual Mazars advisor or alternatively contact:
Please note that this publication is intended to provide a general summary and should not be relied upon as a substitute for personal advice.