Understanding Single Touch Payroll Transition
Single Touch Payroll Benefits – Did you know that sending tax reports and superannuation information to the Australian Taxation Office (ATO) through Single Touch Payroll is now mandatory for all businesses? Are you aware of the important STP specific compliance guidelines and options for your business?
With today’s lightning-fast technological advancement. It’s no surprise that each day experts develop better software to make daily processes more convenient. Hence, being updated with the latest innovations is imperative if you don’t want to be left outdated.
Indeed, ATO has also been keeping abreast with the advancement in digital integration to make their reporting process easier and faster. In fact, recently, to streamline and for the fluid transfer of payroll data from all employers, ATO has introduced the Single Touch Payroll.
You might have been wondering what a single touch payroll is. How it is better than the previous means of reporting to ATO. Yes, it’s new and fresh in Australia and not every business has started using it yet. Well, let’s find out the answers.
What Is Single Touch Payroll?
Single Touch Payroll (STP) is the latest tax and superannuation reporting software that was recently introduced. For ATO compliance with ALL businesses. It started on 1 July 2018 for employers with 20 or more employees only but has been mandatory for all businesses since 1 July 2019. Hence, all employers should migrate to the STP-compliant payroll and superannuation calculation software to avoid penalties.
Those businesses with more than 20 employees should already be using the STP-enabled software from 1 July 2018. On the other hand, those with 19 or fewer staff have just recently been included and still have an ongoing grace period and options for compliance.
Employers with 5-19 employees have until 30 September 2019 to start reporting through STP. Likewise, micro employers that have 4 or fewer employees also have options available such as the no-cost and low-cost Single Touch Payroll solutions.
With STP, reporting of your employees’ payroll information to ATO will be real-time. To put it simply, each time you process to pay your employees, you also need to send through STP their tax and super information directly to ATO. This includes their salaries and wages, and pay as you go (PAYG) withholding.
Does Single Touch Payroll Have Benefits?
Every system development such as the migration to the STP software certainly brings more advantages and a better experience. It’s hard to let go of what you got used to but it’s about time to say goodbye to your exhausting manual spreadsheets and outdated software.
There are a lot of benefits that come with the use of STP for both employers and employees. The following is the list:
Digitalising heavy reports such as payroll and taxation has been the best way to minimise the use of papers whichis beneficial to the environment.
It saves time & energy
With the use of STP, you no longer need to go through the tedious process of reconciling a huge amount of payroll data at the end of the year. Apparently, your STP-enabled payroll software will do the task of direct reporting to ATO each time you run your payroll, reducing your usual reporting requirements.
STP software eliminates potential errors and double handling such as the payroll information in the BAS.
No need for payment summary annual report (PSAR)
The use of STP eliminates the need to submit an annual payment summary report to ATO.
ATO online services access for employees.
Employees can log in to their MyGov account to see their payment summary, year-to-date tax and super information. STP automatically updates each employee’s data every payday reporting.
No penalty for mistakes in your STP report.
You can correct any mistakes in your STP report in the next report without penalties.
Do All Businesses Have Similar STP Compliance Guidelines and Options?
STP compliance covers all businesses regardless of the number of employees. However, there are specific details you need to be aware that ATO has made clear to your business.
The following information will guide you in the implementation of STP according to your business category:
Do you have 20 or more employees?
STP for your business started on July 1, 2018. Hence, you should already be using STP to send your reports to ATO or you have an existing deferral if you need more time. Otherwise, penalties may apply for your succeeding failure to comply.
Do you have 5-19 employees?
With the expansion of the STP implementation, you have been included in the new rollout to require all businesses to comply with STP starting July 1, 2019. Understanding the need for a gradual transition, you have a grace period of until September 30, 2019.
If you’re ready for STP reporting, you can start anytime before the end of the grace period. Otherwise, you will have to file for the Single Touch Payroll deferral. You can submit your deferral application online.
You may also apply for an exemption if you meet the criteria for approval. For instance, you can submit your application online for exemption if you have an intermittent or no internet connection in your location. No or low digital capability and irregular employment patterns.
Do you have 1-4 employees?
There are other options for STP compliance if you only have 1-4 employees with no existing or don’t need payroll software. In fact, ATO has coordinated with software developers to offer no-cost or low-cost STP solutions specifically to help micro employers.
You may avail of simple software, mobile phone apps and portals to use for STP reporting. In connection with this, you may check ATO’s published list of companies that offer these solutions at $10 per month or less.
Moreover, another good option is to have a quarterly STP report through a registered tax or BAS agent instead of sending it each payout. You can avail of this option until 30 June 2021.
Do you have closely held payees?
ATO has defined closely held payees as persons that are directly related to the entity they receive payments from. These include family members of a family business, directors or shareholders of a company and beneficiaries of a trust.
If you have 19 or fewer employees, you’re still exempt from including your closely held payees in your STP report for the 2019-2020 financial year. However, you will start including them in the report on 1 July 2020 with an option to do it quarterly.
How Can I Comply with STP Reporting?
The implementation of Single Touch Payroll for all businesses is indeed a huge change with the way you’ll do your regular reporting to ATO.
While you have the grace period, it’s imperative that you know how you can get ready for the transition before the set deadline.
Migration to STP is legal and mandatory for all businesses and you need to meet the requirements to comply with the law. Thus, you need to know the following ways that you need to do according to your business category.
Check if your existing accounting or payroll software is STP-enabled. You may need to talk to your software provider about the update. Some providers may have the update available but some may not. Hence, if an update won’t be possible, you need to select a new and STP-compatible one.
Choose the STP-enabled software that fits your business needs. Not all STP-capable software may be the right fit for your business. It will be best to talk to a registered tax or BAS agent to ensure that you get the best or most appropriate software to cover your specific business needs.
Get help from a registered agent or payroll service provider to send your STP report on your behalf. It will be practical to seek services from an accounting or payroll service provider that does not just take care of your payroll and tax reports but also help you with your other needs such as business and financial analysis.
Opt for available alternate solutions if you are eligible such as the no-cost or low-cost STP solutions for employers with 1-4 employees. The law also takes into consideration the practicality of your business decision. Hence, if you meet the criteria, ATO has provided the most practical choices for you to be able to also comply with the STP standards.
Make sure to file the necessary application for deferral and exemption. You may not be ready to start STP until a later time or you can’t comply because of no or intermittent internet connection in your location. With these cases, you need to submit fill out and submit the necessary forms to avoid penalties in the future.
Do I Need Accounting Experts for My STP Migration?
You would no longer need to worry about the STP reporting if you get the help of an accounting or payroll service provider. With your expertise, you will have a smooth transition to this latest ATO reporting compliance.
Getting help from registered tax and payroll experts has been a trend not just in new but also in established businesses in entire Australia. As business experts always emphasise, no business can go farther without an effective tax and payroll system.
The good thing about having licensed and expert accountants is that you get to have someone take care of your ATO reporting and you can use your time for other important business matters. Hence, you’re able to leverage your time to address other business areas that need your focus.
Seeking services from experts may sound expensive but it is just a misconception. However, as affordable as the services of the specialists nowadays are, it is still smarter to learn about what they can offer to grow your business.
The best recommendation is to partner with a team of experts that can cater to any aspect of your business. A team that doesn’t just have accountants and tax specialists but also has financial and business analysts. Only then that you can rest assured that you have the right people helping you achieve your business goals.