If you’re an employer, you may have heard about Single Touch Payroll (STP), a major payroll reporting change that starts from 1 July this year. John Shepherd, ATO Assistant Commissioner, outlines what employers should do to get ready for the move to STP.
STP is the most significant change to payroll reporting in decades. It will affect more than 70,000 employers in the first year – those with 20 or more employees. These employers will need to report employee tax and super information to us electronically each pay run. This digital interaction with the ATO will be delivered through payroll software – allowing employers to meet their reporting obligations to us through a process they are already doing.
Each time you pay your employees, you’ll be reporting payments such as salaries and wages, pay as you go (PAYG) withholding and super information.
What’s in it for you
In short, STP is a streamlined way of reporting to the ATO through your own payroll process.
From 2019, the information you report through STP will be pre-filled into the activity statements of small and medium withholders.
You’ll no longer need to provide your employees with payment summaries for the information you report through STP – they’ll be able to access their payment information online through myGov, or by contacting the ATO. The information you report will also be pre-filled into myTax for those who prepare their own tax returns, and employees will be able to check if you’ve paid their super correctly.
Both employers and their registered tax and BAS agents will have access to the information reported through STP in the Business Portal, Tax Agent Portal and BAS Agent Portal.
You’ll also have the option to invite your employees to complete Tax file number declaration, Superannuation standard choice form and Withholding declaration online.
Work out if you’re in or out
If you’re not sure STP applies to you this year, do a headcount of the employees who were on your payroll on 1 April. If the total was 20 or more on that date, you’ll need to take the next steps to get ready.
You don’t need to report your headcount numbers to the ATO, but keep a copy of the calculation for your own records.
There are some employees you don’t need to include in the headcount, so it’s important to understand who’s in and who’s out. Count full-time and part-time employees, and casuals who worked in March and are still on the books on 1 April.
Don’t count anyone who ceased work before 1 April, or casuals who didn’t work in March.
Some seasonal workers can also be excluded from the headcount. This is important for businesses that employ casuals during peak periods, which may push their headcount to 20 or more for a short time during the year.
If you had fewer than 20 employees for at least 10 out of the 12 months prior to 1 April 2018, and you expect to have fewer than 20 employees for at least 10 out of the 12 months after 1 April 2018, you won’t need to start STP reporting this year.
You can self-asses this exemption – and there’s no need to report it to the ATO. You should, however, keep a record of your decision.
For employers with 19 or fewer employees, the transition to STP is scheduled for a year later, from 1 July 2019. This is subject to the passage of legislation in parliament.
What you can do now
Before STP starts, there are a few things you need to do.
- Talk to your software provider to find out when they will be STP ready. They will be able to answer your questions about making the transition to STP.
- Make sure the right people in your business know about STP – including your payroll staff.
- Do a review of your current business processes. Make sure your employee information in your payroll system is accurate. Check if you are paying your employees correctly, including their super entitlements.
- Ask the ATO for a later start date if you need more time to get ready.
- Visit gov.au/stp to find out what STP means for your business.
Don’t panic if your payroll software won’t be ready
Many Australian employers already use payroll software, or outsource their payroll to a third party. The six largest payroll software providers represent about 80% of employers with 20 or more employees, and we expect the majority of these to have STP-ready payroll software in the market by 1 July. Many other providers are either already STP-ready or will be soon.
Some payroll providers have asked us for more time to finalise their STP solutions. If that’s the case with your provider, you should ask if they have a deferred start date for your product from the ATO. You should also make sure that, if they do have a deferred start date, it applies to you.
If you won’t be ready to start STP reporting by your software provider’s deferred start date, you’ll need to ask the ATO for more time to get ready by applying for an employer deferral.
Get ready to take the next step
While we’re remaining firm on the 1 July start date, the ATO is committed to a transitional year to support both providers and employers. In most cases, penalties won’t apply during the first year, and you’ll be able to correct the information you report to us.
Our major focus is to help you transition and resolve any issues which may arise during this period.
The very best way to make the transition to STP is to talk to your payroll software or other payroll service provider, download the checklist and fact sheet from our website, or talk to your registered tax or BAS agent about what you need to do.
Visit ato.gov.au/stp and follow the ATO on Facebook, Twitter and LinkedIn to stay in the loop.
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