As most employers will now be aware, the ATO has introduced Single Touch Payroll (STP), which is the process of reporting your salaries and wages, PAYG withholding and superannuation to the ATO from your payroll solution each time you pay your employees.
STP became compulsory on 1 July 2018 for employers with 20 or more employees.
All remaining employers will be required to report though STP from 1 July 2019.
The use of STP is compulsory and all employers should take adequate steps to ensure they are ready to comply. Below we outline what steps need to be taken to ensure your business is STP compliant.
If you’re still catching up, check out our February 2018 Newsletter “Payroll reporting: A touchy subject” which explains what STP is and how to determine your number of employees.
What to do if you are currently using a payroll system
The majority of existing payroll systems have already become STP-ready and have made STP available to all businesses on an opt-in basis. Below are a list of considerations and actions you need to take before 1 July 2019 to ensure you comply.
- Check that you payroll solution complies with STP.
- If your payroll solution does not comply, discuss with them if they will be ready by the start date. If they are not planning to provide an STP-compliant solution, or will not be ready by the start date, seek an alternative payroll solution.
- Undertake any training necessary to ensure you and any relevant staff understand how to use this new feature in your payroll solution.
- Complete any steps required by your payroll solution provider to get your file ready for STP.
- Put a reminder in your calendar to activate the STP function and start using STP from 1 July 2019.
What to do if you are not currently using a payroll system
To comply with STP, employers must have an electronic payroll solution, as this is the platform that sends the required information to the ATO each time a pay run is processed. Fortunately, there are some simple payroll solutions available (some in development and others already developed) that cost $10 or less per month. There are cloud-based and desktop solutions available to suit your specific needs.
When choosing a payroll provider, consider:
- The cost of the payroll solution.
- The flexibility of the software (for example, cloud-based solutions are generally more accessible).
- How user friendly the software is.
- Whether the software is STP-ready, or will be by 1 July 2019.
Exceptions and transitional arrangements
Closely held employees
A closely held employee is an employee that is directly associated with the entity they receive payments from. Common examples of closely held employees are:
- Directors of a company;
- The spouse or children of a director;
- Shareholders of a company; and
- Beneficiaries of a trust.
The ATO has granted an extension until 1 July 2020 for employers to comply with STP for closely held employees. After this date, closely held employers will have the option to report quarterly based on reasonable estimates. If you elect to report quarterly, the ATO will allow up to the due date of your tax return to adjust any figures previously reported.
Importantly, this extension relates only to closely held employees. If you employ both closely held employees and unrelated employees, you will still need to use STP for all un-related employees.
Micro employers
The ATO is offering micro employers (employers with 1 to 4 employees) help to transition to STP, as well as a number of alternative options – such as allowing those who rely on a registered tax or BAS agent to report quarterly for the first two years, rather than each time payroll is run.
Other exemptions
The ATO will provide exemptions from STP reporting for employers experiencing hardship, or in areas with intermittent or no internet connection. Any employers in these situations should contact the ATO to discuss their circumstances.
When to start using STP
Subject to the exceptions above, STP will become mandatory for all employers from 1 July 2019. As mentioned, some payroll providers are allowing employers to opt-in to STP reporting before that date.
We recommend taking the time to prepare for STP now, but only opting in from 1 July 2019. This will help avoid any transitional issues (particularly around year end PAYG Payment Summaries for the 2019 financial year) by having a clean-cut start date in line with the start of the financial year.
If you have any questions about STP or whether your payroll system is compliant, Catalyst Financial can help you through the process. Get in touch with one of our friendly team members today!
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