Small businesses, with fewer than 20 employees, are required to use Single Touch Payroll from 1 July 2019.
What is Single Touch Payroll?
Single Touch Payroll (STP) is the new mandatory digital payroll reporting that changes how you report your employees’ end of financial year (EOFY) information to your employees and the Australian Taxation Office (ATO).
It is an ATO initiative that requires employers to report salaries and wages, PAYG withholdings and superannuation to the ATO each time they pay their employees, instead of reporting payments once at the end of the financial year.
Large businesses, with 20 or more employees, were required to become STP compliant from 1 July 2018.
Once you start STP reporting, there is no need to produce payment summaries or a payment summary annual report at the EOFY. Instead, an income statement will become available to employees through their myGov account.
STP’S use of of digital connectivity is a necessary part of running a business in Australia.
The introduction of the STP reporting initiative saves time as it sends information while running an existing business process. It will also ensure greater accountability of employers to make sure employees are being paid their correct entitlements via timelier information being available throughout the year in myGov.
All small businesses should have started reporting via STP from 1 July 2019 and have until 30 September 2019 to become compliant with the changing ATO legislation.
Exemptions and Deferrals.
Deferrals for further time past 30 September 2019 may be given if you have put in a request.
Additionally, a deferral to 1 July 2020 has been given if you’re a small businesses with closely held payees (employees who are directly related to the entity from which they receive their pay e.g. family members, directors, shareholders or beneficiaries of a trust), with the option to report closely held payee information quarterly.
The ATO will also allow micro employers, businesses of one to four employees, to report their STP information on a quarterly basis, rather than each time they run their payroll, up until 30 June 2021.
What you need to do.
You will need to determine how you will be reporting through STP- whether you currently have STP-compliant software that allows for the automatic transfer of payroll data to the ATO. You could invest in STP-compliant software or you could outsource STP to an expert provider, like The Razor Group.
For micro employers there are low-cost and free solutions available through the ATO website.
Even if you are already utilising STP-compliant software, you will need to review all your employees’ EOFY payroll information for the 2018-19 financial year and make sure it is correct by 31 July 2019. You can finalise the below information as soon as it is ready after 30 June 2019.
- Tax-Free Thresholds
- Salary Sacrifice
This is also a good time to check you are:
- Resolving any inconsistencies in your payroll
- Paying employees correctly
- Calculating your employee’s superannuation entitlements correctly
- Addressing overpayments correctly
- Maintaining up-to-date employee personal details
The good news is, if you’re a large business utilising The Razor Group’s services, you’re already STP compliant as per ATO legislation. If you’re a small business on a Razor Payroll Package, you’ll automatically become STP compliant as of 1 July 2019 at no additional cost.
The way your employees receive their payment summary is changing.
You will now report their pay, tax and superannuation information directly to the ATO each payday rather than at the end of each financial year to ensure employees are being paid their correct entitlements.
STP is designed to provide your employees with greater transparency of their salary, reportable superannuation and fringe benefit entitlements, which they can view throughout the year in their myGov account.
If they have not registered for a myGov account, they can visit the ATO website online services, and if they are unable to create one or cannot access it, they can contact the ATO on 13 28 61.
They will no longer receive a PAYG Payment Summary from you but will instead receive a message in their myGov account when their income statement is ready. It is important they wait until their income statement is finalised before they lodge their tax return as most employers have until 31 July 2019 to check their employees’ income statements and finalise it for the year.
If you have any queries on Single Touch Payroll, or our other services such as bookkeeping, accounts payable, management consulting or budgeting you can speak to a Razor expert.
For more information:
Duncan Hannay is the Chief Financial Controller at The Razor Group
The Razor Group can provide advice and guidance for all your aspects of business management