Central Coast Accountants

What is Single Touch Payroll all about?

Published on April 26, 2019 at 12:00 AM

Single Touch Payroll (STP) has been introduced by the Government to streamline the collection of information about employees’ tax and superannuation so that the Government is not relying on employers who drag the chain and don’t provide the information regularly.

What happens is the business might eventually close down and employees are out of pocket for superannuation payments due on their behalf. The Taxation Office then can’t collect outstanding liabilities from the businesses or more likely the directors of the companies, as they have probably declared themselves bankrupt.

Single Touch Payroll is designed so that information about payroll will be received on the same day that payroll is processed, for a majority of businesses that may be on a weekly basis.

By utilizing computer software, the Taxation Office can monitor any business not meeting its tax obligations very quickly after the due date for payment of PAYG Withholding Tax and Super. Action can be taken much quicker to preserve employee entitlements.

How does it work?

For employers with over 20 employees, legislation for STP commenced on 1 July 2018. With the majority of large employers using computer software to run their payroll system, it is only a matter of forwarding information electronically using STP Reporting software that normally would have been developed by their software provider.

If employers don’t use a software provider, information can be sent through a sending service provider at a cost, of course.

For the first twelve months, the Taxation Office will be on an education program to ensure the system is settled in, similarly to when superannuation reporting was introduced.

It is still a work in progress, however tax details for an employee can be viewed online by utilising a MyGov account and at the end of the year, employers will probably no longer forward PAYG summaries to employees as information to prepare an income tax return can be obtained online.

What happens with employers with less than 20 employees, which make up the majority of small businesses?

Legislation has been passed to cover these types of employers with legislation commencing 1 July 2019.

The Taxation Office has split these employers into two camps: -

  1. Employers with between 5 and 19 employees, and
  2. Employers with between 1 and 4 employees (termed as micro employers).

For the first camp, the same rules as employers with 20 or more employees will apply.

For the second camp, the Taxation Office has liaised with software developers to build a low cost STP solution, priced at or below $10 per month, but still an additional cost to run your business.

For micro employers, the Taxation Office will initially allow your registered tax agent or BAS agent to report quarterly, rather than each time to run your payroll, probably weekly in the majority of cases.

The Taxation Office has realized STP Reporting will be a major change for employers, and a number of concessions have been introduced with more expected to follow.

The Taxation Office has announced a three-month buffer period with businesses, allowing them to start reporting anytime between 1 July 2019 and 30 September 2019.

Are there special exemptions?

Some exemptions to STP Reporting may be available if you have no internet connection or it isn’t reliable, probably if you live in the country or a remote area.

The Taxation Office has announced that closely held groups will be granted a one-year exemption from STP Reporting with employers due to start quarterly reporting from 1 July 2020.

A close held employee is defined as one who is a non-arm’s length employee, directly related to the entity from which they receive payments, including family members of a family business, directors of a company and shareholders or beneficiaries.

Due to the initial complexity of STP Reporting, we recommend that you contact our office to arrange a meeting to see what assistance we can render to enable you to comply with the Taxation legislation.