Small business owner unsure about Single Touch Payroll? ATO guidelines for STP explained…
Article by Donna Gillies
If you’re a small business owner with 19 employees or less and use payroll software, get ready for a letter from the Australian Taxation Office (ATO).
But it’s nothing to worry about.
The ATO simply wants to ensure that you’re aware of the option to start reporting through Single Touch Payroll (STP) even before the legislation date of 1 July 2019.
It will also suggest that small business clients speak with their accountants if they need help and that their software provider may be in contact with them to let them know when their software offers STP.
What is Single Touch Payroll and why is the ATO introducing it?
Single Touch Payroll allows employers to notify the ATO of their employees’ superannuation and tax obligations each payday.
As an employer, you can do this by using payroll or accounting software with the STP feature. Most packages have this feature available now.
Single Touch Payroll is streamlining the payroll reporting process while also ensuring that employers are compliant and paying superannuation and employee tax obligations on time.
The due dates for payment of PAYG Withholding Tax and superannuation will not change.
Benefits of the new system
Guess what? There will be no need to prepare Payment Summaries and the Annual Payment Summary Statement any more.
And, in the future, the ‘wages’ and ‘PAYG’ labels will be prefilled in your Business Activity Statements. That means less administration for you!
STP will also allow your employees to view their year-to-date tax and super information through the myGov website. They can also view their payment summary information at the end of the year there.
New employees will be able to lodge their Tax File Number Declaration and Super Choice Forms through STP.
From 1 July 2018, employers with 20 or more employees started reporting tax and superannuation information using STP.
As noted before, employers with 19 employees or less will also have to report using STP from 1 July 2019.
How to start with Single Touch Payroll reporting
If you’re already using accounting or payroll software, check that it’s compliant with Single Touch Payroll.
You may find that you just need to update your software and the STP function will be there. Otherwise, contact your software provider.
You can choose to start using Single Touch Payroll now. It may be as easy as just turning it on. Around 15,000 small businesses are already using it.
But you may not use accounting or payroll software currently. You may process your payroll manually using paper. Perhaps you run a company with only 1-4 employees. That’s okay. Two thirds of micro-businesses don’t use payroll or accounting software and the ATO are not trying to make every single business pay high fees to acquire it.
In fact, they’ve asked digital service providers to develop low-cost or no-cost STP software for small business employers to use.
These software options will only be for the STP function – not necessarily a full payroll program – but they will make STP affordable, quick, and easy-to-use, with updates available automatically. They may even offer a mobile phone app to make life easier.
If you’re a small business employer not currently running payroll through a software package, you may like to review the list of proposed low-cost STP solutions here: https://www.ato.gov.au/business/single-touch-payroll/in-detail/low-cost-single-touch-payroll-solutions/.
Benefits of using software to report for STP to the ATO
The ATO does not want to force employers to use software so there may be alternative options, including asking your registered tax or BAS agent to report quarterly on your behalf.
However, you may like to take this opportunity to transition to a payroll software option. There are multiple time-saving benefits:
- You could spend more time doing things that are important to you
- You can focus on the important aspects of your business that really require attention
- You could spend more time with your family
The question is: How much do you value your time?
Accounting or payroll software is also generally more effective than manual systems because it provides:
- Accuracy – fewer mistakes
- Automatic tax rate updates
- Assistance in complex payroll calculations
Are you ready for Single Touch Payroll?
Once you’ve decided which software you’re going to use or an alternative way to report for STP, take the time to check that you’ve got correct details for your employees and are calculating their pay and superannuation correctly.
If you’re ready, start using Single Touch Payroll now. Get comfortable with the process before 1 July 2019.
Don’t worry if you get things wrong or report incorrect information through STP. There are fixes available and the ATO website has a wealth of information, including webinars to watch.
More information from the ATO is available here: https://www.ato.gov.au/Business/Single-Touch-Payroll/News,-events-and-resources/
If you’re not ready for STP by 1 July 2019, there may be a deferral or an exemption option available to you.
The intention of the ATO is not for you to panic or for STP to be a burden. It should be an easy process to set up but, if you require assistance, please contact us here.