As of 1 July 2018 if you are a ‘substantial employer’ – i.e. employ 20 or more employees, you will be required to report your payroll using Single Touch Payroll (STP).
This means, when you pay your staff, the employees’ salary and PAYG withholding amounts will be automatically reported to the Australian Taxation Office (ATO).
The aim of STP is to streamline and align employer reporting of Pay As You Go (PAYG) withholding and superannuation contributions to an employer’s payroll processes as well as giving the Commissioner real time data matching to ensure employers have complied with the relevant PAYG withholding and Superannuation Guarantee obligations.
Who is required to report using STP?
- A ‘substantial employer’ is one that employ’s 20 or more employees. This is based on the number of employees employed and not the amount of full time equivalent (FTE).
- Once you become a substantial employer you must continue to report under STP, even if you no longer have 20 or more employees. If you wish to no longer report under STP you must apply for an exemption from the Commissioner.
- While employers with 19 employees or less are not required to report using STP, they have the option to voluntarily report using STP from the 1 July 2017.
How will it work?
- You will be able to use STP compatible Standard Business Reporting (SBR)-enabled software (i.e. most major accounting software packages) to lodge STP reports to the Commissioner as part of your payroll process.
- SBR-enabled software allows employers to automatically report information that is already produced by an employer as part of their payroll processes to the Commissioner at the time the relevant process is undertaken.
- As it is still early days, the ATO are undertaking consultation and a co-design process with employers and their representatives to determine the best way to optimise employers’ reporting obligations. A pilot will be conducted to test solutions for small business employers. Details have not been provided by the ATO as trials are yet to be completed. We will provide you with an update once the ATO releases more information.
What is being reported?
- Your STP report to the Commissioner each pay period will detail payments you make to individuals and the amount required to be withheld from those payments. Your STP report of payments to individuals is due on or before the date the amount is required to be paid.
- You will also be able to report superannuation contributions. The Commissioner will accept the contribution reports from your SuperSteam software in a bid to streamline this process.
- While the bill does not propose to change your current due date for payment of PAYG Withholding, it will however offer the option to pay your PAYG withholding at the same time as you lodge your STP report to enable the process to be more streamlined.
- If you use STP you will no longer be required to lodge Payment Summaries and Annual Reports.
- You can also choose to report ‘Reportable Employer Superannuation Contributions’ (RESC) and ‘Reportable Fringe Benefits Tax Amounts’ (RFBT) by the 14 July in the next financial year. If you do not report these amounts through STP you will still be required to lodge Payment Summaries to the Commissioner.
- In order to be relieved of your obligation to give payment summaries to your employees and the Commissioner, you must make a declaration in the approved form to the Commissioner by 14 July.
- Employers and employees will be able to complete their Tax File Number Declaration and Superannuation Fund Choice forms online and be lodged directly with the Commissioner.
- The ATO will provide a TFN Validation service which will advise the employer that the employees TFN, name, date of birth and address provided does or does not match the ATO’s records.
Where to from here?
While the Commissioner has advised that it will provide some latitude in regards to penalties, we believe that employers should review their payroll systems between now and 31 May 2018 to ensure they are compliant by 1 July 2018.
As the STP system will be up and running from 1 July 2017 we recommend that clients who fall into the category of ‘substantial employer’ should register to STP prior to 31 May 2018 to ensure they are not at risk of non-compliance.
It appears most major Accounting Software packages are working with the ATO to ensure their software is STP compliant; however we recommend you contact your AFS Tax Consultant to ensure this is set up correctly prior to 31 May 2018.
Should you have any questions regarding STP reporting or general payroll queries please do not hesitate to contact your AFS tax consultant on (03) 5443 0344.