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Single Touch Payroll (STP) starts from 1 July 2018 for employers with 20 or more employees and will be expanded to include employers with 19 or less employees from 1 July 2019.

STP is a reporting change for employers. Essentially, STP requires that each time an employer pays their employees, they will have to instantly report to the Tax Office information such as the salaries and wages, pay as you go (PAYG) withholding and superannuation. The information will need to be reported from software which is a Single Touch Payroll (STP)-enabled payroll solution.

Eventually this will mean:

• Employers will not need to provide payment summaries to their employees for the payments reported through STP;
• Employees will be able to view their payment information in ATO online services, which they will access through their myGov account;
• Some labels on activity statements will be pre-filled with the information already reported.

Overall, STP will provide greater transparency of information to the ATO and employees alike (potentially in real time), which is expected to lead to greater compliance and payment by employers with their tax and superannuation obligations.

That said, the transition to any new regime carries with it many practical issues and challlenges.

If you are an employer, then to assist you in being STP-compliant by the relevant date, we have put together a helpful step-by-step guide.

Step 1: Determine the STP start date for your business

As mentioned earlier, STP starts from 1 July 2018 for employers with 20 or more employees and will be expanded to include employers with 19 or less employees from 1 July 2019.

The “headcount” of employees (for the purposes of determining the STP start date) is 1 April 2018.

“Employee” for STP headcount purposes is the common law definition of employee (which is narrower than the definition for Superannuation Guarantee purposes). Thus, workers for whom an employer does not withhold PAYG from will generally not count towards the 20 employee threshold. Also not included in the count are staff provided by third-party labour-hire, office-holders and directors of companies, casual employees who did not work in March 2018, independent contractors and religious practitioners. On the other hand, employees based overseas, employees absent on leave, and seasonal employees are included.

It appears that connected or related businesses are not required to include employees from those other businesses in their head count. Only wholly-owned groups are required to do so. Where a company owns 100% of any other company they would generally form a wholly-owned group and if the employee headcount across all entities of the wholly owned group was 20 or more, then all entities in the wholly owned group would be larger employers and thus required to be STP-compliant by 1 July 2018.

Step 2: Check that your Payroll Systems will be STP-enabled by the required start date

If you are using accounting software:

• Make enquiries of your software provider as to their STP readiness. We are aware that the main players in the Small-to-medium (SME) business space (Xero, MYOB, Reckon, Intuit) are all working toward the 1 July 2018 deadline, but if you are using other software providers, it will be worth checking their readiness or whether in fact they have sought a deferred start date for your product.
• Find out what support they will offer to their customers to transition to STP.
• Subscribe to their updates.

If you are not using accounting software of any kind and you have employees, then it is time to computerise.

Step 3: Review your Payroll Processes

STP will offer greater visibility of your payroll to the ATO and other government agencies. Now, more than ever before, it is crucial that all aspects of your payroll are being done right.

The introduction of STP is a great catalyst for performing an overall review of your payroll processes by:

• Checking your HR practices and procedures.
• Checking you are paying your employees correctly.
• Checking you are calculating your employees’ super entitlements correctly.
• Checking you are correctly dealing with leave.
• Checking you are complying with any applicable industrial awards and are complying with the Fair Work Act 2009 and associated amendments.
• Checking you are addressing overpayments correctly.
• Checking that your employee information is accurate, including names, addresses, date-of-birth records.
• Checking that sensitive information (such as Tax File Numbers) is being properly safeguarded.
• Making sure the right people in your business know about Single Touch Payroll – especially your payroll staff.

Step 4:  Educate your Employees

STP is part of an overall move to get businesses to move away from paper-based payroll processes.

For employees to realise benefits from these changes, they will need to be able to access their key payroll information online in real time, and year-to-date pay and superannuation contributions via a myGov account.

If you are using accounting software, check that you are fully utilising any aspects of the software that provide online access to information for employees, and that employees are trained on how to do so. Also encourage employees to familiarise themselves with myGov and to create an account if they have not already done so.

How Can We Help?

If you need assistance on any of the following, we can help:

1. Determining which workers need to be counted in the 1 April 2018 headcount.
2. Calculating the “headcount” for your business.
3. Determining the STP-readiness of your software provider.
4. Computerising if you currently do not utilise acccounting software of any kind.
5. Reviewing your payroll processes to ensure they are sound.
6. Advising on the extent to which you are utilising features within your accounting software for the online reporting of information to employees.

 

Darren Hagarty is a Director of PT Partners.

The author also thanks and acknowledges the contribution of Josh McMullen, Senior Tax Writer at PT Partners.