Single Touch Payroll (STP) is coming!
From 1 July this year, single touch payroll will become reality for those businesses with 20 or more employees. Businesses with 19 or less employees will have a further 12 months to prepare (subject to legislation being passed in Parliament). STP basically means that employers will report payments such as wages, PAYG withholding and superannuation information directly to the ATO from their payroll system each time a payrun is completed. This will mean that all payroll systems will need to be computerised and updated to include the STP facilities.
The important date in working out whether you will be starting this system in 2018 or 2019 is the 1st of April 2018. If you have 20 or more employees on this date, you will be considered a 'substantial employer' and will be required to start using STP on July 1 this year. When you are working out whether you have 20 employees you need to include the following:
1. Full-time employees
2. Part-time employees
3. Casual employees who are on the payroll on April 1 and worked at any time in March 2018
4. Employees based overseas
5. Employees absent on leave (either paid or unpaid)
6. Seasonal employees (staff who are engaged short term to meet a regular peak workload)
There are some employees who do not need to be included in the April 1 headcount and they are as follows:
1. Employees who ceased work before April 1st
2. Casual employees who did not work in March
3. Independant contractors
4. Staff provided by a third party hire organisation
5. Company directors
6. Office holders
7. Religious practitioners
If your company is part of a group, the total number of employees employed by all member companies of the wholly-owned group must be included.
If you are currently using a computerised payroll system, you will need to keep watching for updates and news relating to STP so that you are aware of what you need to do to get an STP compliant version of your software.
If you are currently not using a computerised payroll system, it is time to start looking for one that will suit your requirements. Your tax practitioner would be a good place to start looking for recommendations as they will be aware of how your business works and what system should work best for you.
The ATO at present, say that they intend to use the information provided by this system to better monitor SG compliance and to identify those people claiming multiple tax-free thresholds. The information collected by this system will be much more than that and hopefully it will help individual taxpayers as well. For those taxpayers with MyGov accounts, the information will be sent to those accounts, so at all times there is a record of year-to-date wages and superannuation. At year end, employers will no longer need to provide a payment summary, so employees will no longer need to wait for that crucial piece of paper to prepare their income tax returns.
For some employers this transition will happen seamlessly and business will go on as normal. For some employers this transition will be a lot harder, especially if/when it comes in for smaller employers, and I would encourage those people to use the resources available to you and work with your tax practitioner to try to make the transition as easy as possible.