Your guide to the implementation of Single Touch Payroll

Single Touch Payroll (STP) is a new way of reporting tax and super information to the ATO.

The information is sent to the ATO directly from your Accounting software, or through a third part – such as a sending service provider.

STP Overview

• Who needs to be registered for STP?
• How STP works
• Benefits of STP

STP Reporting

• What you are required to report
• Voluntary reporting to the ATO
• Payments that cannot be reported
• Contractors

Preparing for Single Touch Payroll

• What you need to do
• Rules for Reporting through Single Touch Payroll
• Finalising your Single Touch Payroll Data
• PAYG without reporting
• Superannuation payments
• What employees need to know

FAQ’s on Single Touch Payroll

• Is AUSkey required?
• Do you need to open a myGov?
• Will there be any penalties for not complying?
• Is there a low-cost software option?
• Can I postdate payruns?
• What if an employee leaves prior to STP registration?

STP Overview

Who needs to be registered for STP?

• Large employers with 20 or more employees should now be reporting through STP, or have applied to the ATO for a later start date.
• Small employers with 19 or less employees will need to report through STP from 1 July 2019. This is a gradual transition and the ATO are providing flexible options.
• Micro employers with 4 or less employees will need to report through STP from 1 July 2019.

How STP works

STP works by sending tax and super information from your payroll or accounting software to the ATO as you run your payroll.

When you start reporting, you will run your payroll, pay your employees as normal and give them a payslip. Your pay cycle does not need to change, and you can continue to pay your employees, weekly, fortnightly or monthly.

Your STP enabled payroll software will send the ATO a report which includes the information required such as salaries and wages, pay as you go (PAYG) withholding and superannuation information.

Benefits of Single Touch Payroll

• Simple Reporting to the ATO
• Save time by using Accounting Software to report to the ATO
• Easy compliance
• Accuracy – make it easier to get employees pay right
• PAYG Payment Summaries – will be no longer required to be issued
• Better access to information – employees can view their tax position at any time.

STP Reporting

What you are required to report

Through STP you will be required to report on the following items:

• Payment to an employee, such as salary or wages
• Payment of remuneration to the director of a company
• Payment to an office holder
• Payment to a religious practitioner
• A return to work payment to an individual
• Payment for termination of employment
• Unused leave payment
• Payment of parental leave pay
• Payment to an employee under the Seasonal Labour Mobility Program

Voluntary reporting to the ATO

You may choose to include certain withholding payments in your STP report. These are not mandatory. STP offers the ability to streamline your reporting as opposed to have a number a separate reporting processes to assist in efficiencies of real-time reporting and also help with your compliance processes.

You can also choose to include reportable employer superannuation contributions and reportable fringe benefit amounts for your employees.

If you choose not to report these amounts through STP, you will be required to give payment summaries to your employees and a payment summary annual report to the ATO covering these payments.

Voluntary reporting labels:

• Payment that is covered by a voluntary agreement – Business and personal services income
• Payment under a labour hire arrangement or a payment specified by regulations – Business and personal income
• Payment for termination of employment – ETP (death benefit)

Payments that cannot be reported

Some payments cannot be reported through STP and these include:

• Payment that are generally not paid through a payroll process
• Payment made by payers to recipients that are generally not their employees, such as:

  - Department of Human Services

  - Investment bodies and managed investment funds

  - Purchasers of certain taxable Australian property

• Superannuation income stream or an annuity
• Superannuation lump sum
• Social security payment or similar
• Compensation, sickness or accident payment
• Payment of income of closely held trust where tax file number is not quoted
• Recipient does not quote ABN
• Dividend, interest and royalty payments
• Departing Australia superannuation payment
• Excess untaxed roll-over amount
• Payment to a foreign resident
• Payments in respect of mining on Aboriginal land, and natural resources
• Distributions of withholding MIT Income
• Distributions by AMITs
• Alienated personal services payments
• Shares and rights under employee share schemes
• Capital proceeds involving foreign residents and taxable Australian property

Contractors

Payments made to contractors are not mandatory under STP. However, if you currently report contractors through your payroll solution, you should continue to do so under STP.

If you report payments to contractors, and you have a voluntary agreement to have withholding applied, you do not need to provide a payment summary to these contractors.

Where the contractors are managed outside of payroll, you do not have to report payments to them under STP.

Preparing for Single Touch Payroll

What you need to do

You will need to determine how you will report through STP:

• If you currently use payroll software within your accounting software, most online accounting software’s have a solution that offers STP reporting.
• You can choose a payroll solution that offers STP reporting if you do not currently have one.
• At A Plus Business Advisors, we have several options available as we work very closely with MYOB and Xero software companies
• Review your business processes and data – before you start reporting through STP, you should review your current payroll processes.
• Conduct a thorough check of all employee information including names, addresses, date of births and tax file numbers.
• Check that you are addressing overpayments, calculating super and paying employees correctly.

Rules of Reporting through Single Touch Payroll

Each time you report your Single Touch Payroll report, it needs to include the below minimum reporting requirements for you to meet your STP obligations.

Your updated software will capture the data that the ATO require and these include:

• You are required to report a pay event to the ATO on or before the pay day.
• The report must include, each employee with an amount subject to withholding paid in that regular pay circle.
• You must report the year to date values of gross salary, allowances, deductions and PAYG withholding for each employee included in that pay event.
• These amounts can be zero, however, they cannot be negative.
• You must report year to date employer superannuation liability for each employee in that pay event.
• You must report period gross salary or wages and PAYG withholding for all employee payments included in that pay event.
• All payees must have either a tax file number or Australian business number reported.
• A pay event must contain at least one employee record.

Finalising your Single Touch Payroll Data

By reporting thru STP, you may be exempt from giving payment summaries and a payment summary annual report for the amounts you reported to the ATO.

This information will be available to your employees online through myGov. Your employees can also request a copy of this information from the ATO.

To be exempt from issuing these payments summaries to your employees, you will need to make a finalisation declaration. This declares you have provided all required information for the financial year through your STP reporting.

You will need to provide a payment summary for any payments not reported through STP.

You make a finalisation declaration by providing a finalisation indicator for an employee as part of your STP reporting.

Once you have proceed the finalisation indicator for the employee, the ATO will pre-fill the employee’s income tax return and display the information as ‘tax ready’ in myGov.

PAYG withholding reporting

There will be no change to the way you are currently reporting your PAYG Withholding either, monthly, quarterly or annually.

Superannuation payments

There will be no change to the way you are currently reporting and paying your superannuation liabilities if your business is Superstream compliant.

What employees need to know

Once your business starts reporting to the ATO through STP, employees will be able to see their year to date tax and super information online. This will be available in myGov.

It is not mandatory to employees to have a myGov account, however, if they want to access their information online throughout the year, they will need one.

Creating a myGov account is easy: MyGov.

FAQ's on Single Touch Payroll

Is an AUSkey is required as part of STP reporting?

Accounting and Payroll software options can connect directly to the ATO which does not require an AUSkey to lodge.

Do Employers need to open a myGov account to be STP Compliant?

Small Business owners will not need to open a myGov account to be STP compliant.

MyGOV is a whole of government access to services, through one sign-in. It will allow employees to see their superannuation information being reported, as well as STP information that’s been reported.

Will there be financial penalties for not complying?

Employers will not be liable to pay a penalty during the first 12 months, unless the Commissioner first issues a warning notice. Warning notices are intended for those employers who refuse to comply at all.

Is there a low-cost software solution available to Micro Employers?

Yes there are options available, please contact us for more details.

Can I postdate payruns if I go on leave and not in the office at time of payrun?

Yes – you can postdate payruns and lodge with the ATO. If any changes are required, these can be done on your return and relodged with the ATO.

If some of the employees have left prior to being registered for STP how do I include them in the end of year validation process?

Run a payroll and include these employees with a zero pay and then the ATO will receive their year end figures correctly and you will be able to reconcile the end of year wages on the 30th June 19.

Need Assistance?

To discuss your personal bookkeeping in more detail and to prepare your business for the implementation of STP, click below to book a complimentary bookkeeping consultation with one of our specialists.