29 Mar 1 April 2018 Deadline Looming for all Employers
Single Touch Payroll (STP) is a reporting change for employers that will require salary and wages, pay as you go withholding and superannuation information for your employees to be reported to the ATO at the time of each pay event.
This will apply to significant employers (20+ employees) from 1 July 2018 and small employers (19 or less) from 1 July 2019
To determine whether you are a significant or small employer you will need to count each employee on your payroll on 1 April 2018. There are some exclusions from this headcount.
Once you are in the STP regime you will remain there going forward.
To enable you to report this information your payroll system will need to be STP compliant. You should confirm with your software provider whether they will offer STP reporting and when they will be ready.
Application for a deferral to commencing STP reporting can be made in extenuating circumstances.
Some reporting requirements will change once STP is implemented and will be able to be managed online rather than through paper documents.
Employees will be able to lodge a TFN declaration and Super choice form online. They can access their annual employment income through a myGov account or tax agent.
There will be no change to the payment obligations for PAYG withholding and superannuation guarantee contributions, however you can choose to pay these obligations at each pay cycle.
Early planning with respect to reviewing your payroll software capability is important. You should also confirm your payroll data is accurate and up to date with respect to your employees and that you are paying your employees correctly.
What is Single Touch Payroll?
Single Touch Payroll (STP) is a reporting change for employers.
You will report salaries and wages, pay as you go withholding and superannuation information from your payroll system each pay cycle.
When will STP commence?
From 1 July 2018 for substantial employers (employers with 20 or more employees) and from 1 July 2019 for small employers (employers with 19 or less employees)
Small employers can voluntarily commence STP on 1 July 2018
When do I confirm whether I am a substantial employer?
You will be required to count the number of employees on your payroll on 1 April 2018 to determine if you have 20 or more employees.
This is based on head count not on full time equivalent employees.
Who do I include in my headcount?
Full-time and part-time employees
Casuals that worked any time during March 2018
Employees based overseas
Employees absent or on leave (paid or unpaid)
Who isn’t included in my headcount?
Any employees who ceased work before 1 April 2018
Casual employees who did not work in March 2018
Staff provided by a third-party labour hire organisation
*Whilst they are not included in your headcount, if you withhold from their payments and they are in your payroll system you will be required to report the payments in STP.
What if my headcount goes below 20 employees after 1 April 2018?
There will be no change. Once you are in the STP reporting regime you will continue to report this way.
What if I am a closely held entity?
There are no carve outs for closely held entities. They will be required to report throughout the year as per all other employers.
How do I get ready for STP?
Speak to your payroll software provider to confirm if they will offer STP reporting.
Check if they have a deferred start date – if they do have a deferred start date ask for the deferral reference number as you will need this to apply for your own deferral from the ATO.
You may need to consider an alternative provider for your software if they are not offering STP.
If your records are not on an electronic payroll solution you will need to consider transitioning to this.
Review your business processes
Make sure your payroll staff are up to date with STP
Check you are paying your employees correctly in accordance with relevant awards and agreements
Check your are calculating your super entitlements correctly on the various components of their income.
Check your employee information is accurate, including names, addresses, date of birth, and TFN.
Can I apply for a deferral if I am not ready?
Yes but it will be only granted in extenuating circumstances such as natural disaster, transitioning to a new STP- enabled solution, using a customised payroll solution and you need time to test the solution, or have complex payroll arrangements.
Exemptions will be granted if you are in a rural area with no reliable internet connection.
What has changed for year-end reporting?
You will not need to prepare and send in payment summaries and the annual payment summary reconciliation to the ATO as you will process a Finalisation Declaration for your employees either at termination of employment or at the end of the financial year.
Employees will be able to access this information through their personal myGov account or through a tax agent. You can choose to continue to provide a payment summary to your employees at year end.
Does this change when I pay PAYG withholding and Superannuation obligations?
No. You can continue to pay these obligations in accordance with the legislated timeframes that apply to you. You may choose to pay these as you go if you would like to only have to deal with these obligations at the time you pay your employees. It may assist you with cashflow smoothing.
Guidance for reporting
When you start reporting you will do so at each pay cycle whether it is weekly, fortnightly or monthly. You can have different pay cycles for different employees.
You can also report out of cycle payments to the ATO at the time of the payment or in your next regular pay event.
If you make an error in a report you will be able to amend the report in the next pay cycle subject to a threshold to be advised.
No reporting penalties will be applied during the first transition year.
Commencing and ceasing employment can also be reported in a pay event.
Employees with be able to lodge and online Tax File Number Declaration and Superannuation Choice declaration. You may wish to advise your employees that you will not be issuing payment summaries and advise them to register for a myGov account to access their end of year employment income.