Single Touch Payroll – Non compliant businesses are to be contacted by the ATO
How does STP work?
STP works by sending information recorded on your payroll directly to the ATO after each pay run.
Businesses previously reported this information by means of PAYG Payment Summaries which were lodged with the ATO once a year.
Using this new system, the data will be submitted digitally using a specific format called SBR (Standard Business Reporting) that will be provided by your accounting software.
The type of information that the ATO will receive includes employee details, salaries and wages, Pay As You Go Withholding and Superannuation.
How will this benefit my business?
• Since the ATO will receive your payroll details as each pay run is processed, you will no longer be required to prepare annual PAYG Payment Summaries at the end of financial year. You simply let the ATO know (through your software) that you have made your last pay run for the financial year for your employees.
• Your employees will be able to see their year to date tax and superannuation information in their myGov account (ATO online service) and they can access this at any time.
• From 2020, the ATO plans to pre-fill activity statements labels W1 and W2 (Gross Salary & PAYGW) for small and medium business with the information they reported to the ATO using STP. This will make BAS preparation easier and reduce any errors in declaring wages through BAS or IAS.
How will this impact my payroll?
• For businesses that are still recording and processing payroll using a paper method, this will be a push for them to use an automated software system to record their payroll. Using an accounting software will streamline payroll data processing and also eliminate incorrect PAYGW and superannuation calculations.
• For businesses that are already processing their payroll through an accounting software, an additional step will need to be completed after each pay run has been processed. This additional step is to submit your pay run data to the ATO. All the other processes should remain as normal.
What to watch out for with STP in place?
• According to the ATO’s website, if you make mistakes in your STP report, you can correct them in the following report and you will not be penalised. In saying that, it is always better to be thorough before submitting each pay run. We suggest that you periodically review your payroll processing procedures to minimise errors.
• The ATO will be receiving your business superannuation liability information through STP and they will data match this with information that they receive from superannuation funds. Superannuation funds will report to the ATO when payments are made to your employee’s chosen or default fund. It is a step that the ATO are making in order to make sure that employees are paid their correct entitlements. Because of this, as business owners, you have to make sure that superannuation is received by the superannuation funds by the due dates to avoid any penalties.
STP has been compulsory since 1 July 2019 and if you are not yet compliant, you need to make sure the following is done:
• Make sure your accounting software is STP ready and compliant and that you have clear instructions on how to process your payroll using STP.
• Record your payroll procedures and review them for accuracy. This will help to minimise errors as well as correcting old processes that may be redundant/unnecessary.
• Make sure that details of new employees are recorded correctly. An incorrect TFN may cause issues with your STP submission and incorrect superannuation details may cause your payment to be returned and considered as a late payment and therefore no longer tax-deductible.
• The ATO have mentioned that they will provide an exemption for closely held payees (businesses that only make wages payment to family members) until 1 July 2020. You will need to confirm this with your accountant or speak to us to see if your business is classified as closely held.
Be prepared for STP and know your employer obligations.
Don’t leave it until the last minute!
Speak to us today if you have any questions or need help with STP!