Your Guide to Single Touch Payroll (STP)
Single Touch Payroll (STP) is a new way of reporting tax & superannuation information to the ATO. This comprehensive guide provides a brief overview of STP.
With the deadline to file taxes just around the corner, you might have heard about Single Touch Payroll (STP). STP is the most significant change to reporting systems for businesses since the introduction of GST in 2000. Larger employers implemented STP reporting last financial year.
Under STP, the employer can directly report salaries and wages, PAYG and superannuation to the ATO each time the employer runs payroll. This process streamlines the payroll reporting process. STP also allows the ATO to confirm that employers are compliant to Australian laws and are paying employees their entitlements on time and accurately. At the end of each financial year, you need to declare that you have lodged all reports.
Benefits of Single Touch Payroll
Single Touch Payroll sends real-time data to the ATO every payroll cycle and in doing so, increases visibility, efficiency and reduces tax evasion. Other benefits include:
- You don’t need to prepare payment summaries for your employees at the end of every financial year. This will be available on the myGov website.
- Employees can view their year to year PAYG and super information through the myGov website. This gives employees an insight into their tax position before the end of the financial year.
- Automated payments result in fewer errors.
- Employees can easily lodge their income tax using the STP information available on the myGov website.
- The STP software intends to prefill wages and PAYG labels in your Business Activity Statements in the future. This means less administration and more time for other important stuff.
- You don’t need to submit a Payment Summary Annual Report at the end of the financial year as ATO will obtain this through STP reports.
- STP solutions will provide automatic tax rate updates and assist in complex payroll calculations.
Single Touch Payroll and Types of Employers
There are no blanket exemptions for particular types of employers or industries. All employers are required to implement STP from the current financial year unless they have applied for deferrals or exemptions. The ATO has designed special arrangements for employers with less than 4 employees, close held payees or seasonal employees.
Micro Employers (1-4 employees)
If your company engages the services of four or fewer employees, you can implement a no-cost or low-cost STP that includes a straightforward payroll system and mobile apps. This would cost the business less than $10 per month. For the first 2 years (until 30th June 2021), you can instruct your registered agent to lodge STP information quarterly. However, you have to transition to payday reporting in these two years.
Small Employers (5-19 employees)
All small employers were expected to start reporting from the start of the financial year 2019. However, this period has been extended to 30th September 2019. Small employers have the additional option of reporting STP quarterly through their registered tax or BAS agent.
Large Employers (20 or more employees)
STP for large employers was implemented last financial year. If you have just qualified as a large employer, you have to start reporting through STP unless you have an approved deferral in place. The get ready and start reporting checklist should assist you in your transition.
Employers with Closed Held Payees
Close held payees are employees directly associated with the body issuing payment. For instance, directors of a company and family members of a family-owned business will fall under this classification. These employees may not be paid a regular wage or salary and instead may collect their payment from the income or profit of the business throughout the year. Employers with close held payees have the option of lodging STP report every three months. This can be done by yourself through an STP enabled software solution or a registered agent.
Employers with Seasonal Workers
Businesses employing casual workers for short periods during peak seasons did not have to report through STP for the 2018-2019 financial year. However, the STP now applies to all businesses and therefore, you are expected to lodge STP reports from the current financial year.
STP Deferrals and Exemptions
If your business is not ready for STP, you may be eligible to seek deferrals or exemption from reporting through STP.
If your business needs more time to transition to a new STP-enabled solution and need time to tests the new software, you will be eligible for transitional deferral. This also applies to businesses that rely on software providers who have applied for deferrals. The software provider is required to inform you of the deferral date and a reference number. You have to start reporting on or before this approved deferral date. Small employers can apply for deferral if they cannot start reporting by the 30th of September 2019.
Intermittent or No Internet Connection
You are eligible to seek an exemption or deferral if you live in an area with no reliable internet service. Unreliable internet connection will severely affect your ability to lodge STP reports. The ATO will grant an exemption or a deferral depending on your circumstances.
You are eligible to apply for an operational deferral if you have commenced reporting through STP but cannot continue lodge STP reports for a while due to extenuating circumstances.
You are eligible to apply for recurring deferral if your business faces intermittent circumstances that interfere with your ability to submit STP reports on time.
STP enabled software offers businesses the opportunity to send all the relevant information to the ATO with one touch of a button. If you have any queries about Single Touch Payroll solutions, please get in touch with one of our employment lawyers.
Anjaly is working in our Content Team as a Legal Tech Intern. She is currently studying a Bachelor of Laws and Bachelor of Science at Macquarie University. She has a particular interest in Intellectual Property Law, Employment Law, and exploring how technology can improve access to justice.