You may have heard some noise from the Tax Office about Single Touch Payroll. If you have more than 20 employees, you should know exactly what it involves because it should be implemented by now. If you don’t have more than 20 employees, it will still happen, you just have a little longer before you must transfer over to the system.
So, what is Single Touch Payroll (STP)?
In a nutshell, it means every time you run payroll, you must report electronically to the Tax Office. The reporting will include wages, PAYG withholding and superannuation guarantee.
The good news is that if you are currently using one of the major accounting programs (think Xero, MYOB or QuickBooks), the change over will be relatively easy, providing you are using the latest version.
The bad news is if you don’t currently use an accounting program to prepare your wages or your program is out of date, you will need to move over to compliant software.
****STOP PRESS**** The Tax Office have published a list of low-cost STP providers specifically for micro businesses. See an update here. *********
The proposed start date for businesses with fewer than 20 employees is 1 July 2019. While that may seem like a long way off, if you are going to need to implement a whole new accounting system, you really start to think about it now!
Why is the Tax Office doing this?
There are two reasons. Firstly, the Government has been on a mission to have all interactions with the Tax Office “digital by default”. In theory, it’s meant to simplify interactions with the government by only having to report information once, as well as ensuring the information is more accurate and timely. The second reason for the implementation is that it’s a way of ensuring employers are meeting their tax, wage and superannuation obligations – they’re all about trying to eliminate the dodgy operators.
How will it work?
In theory, it’s very simple. You process a pay run in your STP-compliant system. At the time you make payment to your employees, information about gross wages, PAYG tax withheld and superannuation guarantee is reported to the Tax Office. You do not need to make any changes to the timing of your payroll cycle. This information will then be used to populate your activity statement. There will be no change to when you need to pay PAYG and superannuation. At the end of the financial year, you will not be required to prepare PAYG payment summaries for employees or the annual report. It will simply be a matter of completing a declaration to say that the payroll is complete and final for the year.
Anything else I need to know?
The legislation finally passed the Senate on 5 December 2018 and so now will apply to all employers. If you are a business employing 19 or fewer employees, you will need to adopt STP from 1 July 2019.
Employees will no longer receive an annual payment summary. However, employees will be able to see year to date tax and superannuation information through their myGov account. The information will be updated within a few days of receiving the information from employers.
I’m sure there are lots of questions about how it’s all going to work and in a future blog post I will attempt to answer the most frequently asked queries. If you have any questions you’d like answered, please email me through the contact page.
In the meantime, the Tax Office has lots of information about implementation.
Do you have further questions about how STP will affect your business? I’m more than happy to chat with you and offer a FREE 30 minute initial consultation. You can easily book online here and I look forward to helping you sort your finances!