In July 2019, the Australian Tax Office (ATO) made Single Touch Payroll mandatory for all small businesses with staff. Because of this, we are sharing this single touch payroll guide, to help you navigate this new process.
Last year it was rolled out to businesses with over 20 employees, and soon it will apply to all businesses with employees.
You probably know about the changes by now, but just in case you don’t, here’s a quick overview.
Single Touch Payroll (STP): The Basics
Although you may have heard about Single Touch Payroll (aka STP) by now and how it’s the “Biggest thing since GST”, it’s really common for business owners to find themselves unprepared. And this single touch payroll guide will help you get prepared, if you implement all the information we share with you.
STP means for you, as an employer, that your payroll reporting now needs to go through the STP system.
Processing payroll via the STP system needs to be done by using compliant payroll software which allows you to report employee wages, PAYG tax and superannuation info to the ATO every time you do a payroll.
From 1 July 2019 you need to be set up on compliant software and then make sure you report every run through STP, instead of reporting it quarterly on your BAS or at the end of the financial year on the PAYG Payment Summary report.
As an employer, this is something that you (or your bookkeeper) will need to implement for the business. If you don’t handle payroll yourself, it’s still important to be aware of it, as it does change a few things when it comes to the business’s paperwork.
Sounding a bit overwhelming? It’s actually pretty simple if you have the right tools and the right support.
If you need help finding a compliant software or managing your STP, we can help >>> get in touch.
Let’s dive into the details, and take a look at what this means for you, the business owner (employer), as well as how the changes affect your employee!
The Employer (You!)
Most of the changes that are happening will affect you, the employer.
The biggest changes are around the process of reporting.
Each pay run, the total gross wages, PAYG tax and superannuation data is sent to the ATO via the STP compliant software.
This means that these numbers are reported to the ATO every time you do a payroll.
But what do you, as the employer actually have to DO?
Steps In Processing Single Touch Payroll
There are a few steps that need to be taken to ensure STP goes smoothly; if these steps are done in the right order (at the right time!), there shouldn’t be any hitches when it comes to implementation.
- Your employees’ wages are recorded using the STP compliant payroll software
- Payslips are generated and sent to your employees
- Wages are paid via internet bank transfer
- Your employees receive payment for salary or wages into their bank accounts
- You then ‘file’ the pay-run event information, sending it to the ATO
- You make a “Finalisation Declaration” at the end of the financial year.
- You will no longer need to provide PAYG Payment Summaries to employees at the end of the financial year or lodge a PSAR with the ATO
As an employer, you need to make sure that everything is correctly recorded. Without this crucial first step, the rest of the process kind of falls apart (yikes!).
It’s also really important to note that The Finalisation Declaration REPLACES the PAYG Payment Summaries and PSAR. You might still need to complete End of Year Payroll Reconciliations (for previous years), so it’s good to double-check!
Also, make sure that you are working with a bookkeeper or accountant that is using your business’s STP compliant software.
Okay, this is actually an easy one. When it comes to your employees, things don’t really change all that much!
Basically, all of the relevant information for the employee, is stored in their MyGov account, all in one place. Your employee can log into MyGov to see wages, PAYG tax and super, and then lodge their tax return at EOFY.
While your employees don’t really have to do much differently (when it comes to the business), this does affect their reporting, which is why it’s important that everyone in the business is aware of the changes.
Of course, all of these legislative changes are being organised by the Australian Tax Organisation (ATO). The pay run data is matched by the ATO to you and your employees, then sent to your employee’s MyGov account, via their systems.
So…What does this mean? Basically, it means that the ATO is kept informed, and can check that everything is matching up as it should, to prevent any hiccups.
The ATO receives the following data from you, the employer: year-to date wage info, year-to-date PAYG Tax withheld, as well as year-to-date superannuation accrued and paid.
The ATO then uses this to match the data between the you and your employees, pre-fill data into your employee’s tax returns, and allows for ease of tax lodgement.
BAS, FBT, ETP, RESC
Phew… That’s a lot of acronyms!
Luckily, it all breaks down and makes a lot more sense. To start off: Employers (like you!) still need to make sure that their business submits a BAS, when it’s that time of the year.
ETP (employment termination payments) and RESC (reportable employer super contributions) both need to be reported when you file your pay runs (every time you do payroll, when relevant).
FBT (fringe benefits tax), doesn’t need to be reported during every pay run, but it DOES need to be reported when STP is finalised.
PAYG Payment Summaries
One benefit to using STP, is that there is no need to produce payment summaries or annual payment summary reports. The confirmation process for STP is a lot easier (at the end of the year), and it allows you to make sure you have reported everything fully.
This is good news for you as a business owner, as it streamlines the process and helps you make accurate reports, more easily!
Remember, while this post is meant to help you make informed decisions, it can never replace one-on-one advice from a professional. This single touch payroll guide shows a lot of information but it does need to be applied to your business, specifically.
This is especially true, since there’s SO much to cover when it comes to STP. So if you’re looking for more information, don’t hesitate to contact us to receive tailored advice for YOUR business.
Thanks for sticking around to the end…I know there was a lot to process (there’s a lot to learn about the STP, after all).
Do you have any questions about STP? Please send us a message or book a free consult.