Ready or not, single touch is coming. We give you the rundown on the what, why, when and how of the latest reporting requirement for business.
What is single touch payroll?
Single touch payroll (STP) is a government-mandated change to the way you report your employees’ payroll information.
STP means that wages, allowances and deductions, PAYG withholding tax, and super information will be sent electronically to the ATO directly from your payroll software when you pay your employees. This means you will no longer have to complete payment summaries at the end of the financial year.
All in all, STP is designed to make reporting obligations quicker and easier for small businesses, even if implementation may cause a few headaches in the short term.
What does it mean for small businesses?
Businesses with 20 or more employees must start reporting through STP from 1 July 2018 – but only if your payroll software is ready.
Some software providers have asked the ATO for extra time to be compliant, and have been given a deferred starting date. Be sure to check with both the ATO and your software provider ahead of time to know when you should be starting.
If your business will not be ready, you need to apply to the ATO for a deferment yourself.
Businesses with 19 or fewer employees will not need to start STP reporting until 1 July 2019, although you are free to start sooner if your software is ready.
As with all new processes, there may be teething problems. So all businesses are exempt from penalties for late reporting for their first 12 months of using STP.
What does it mean for employees?
With businesses and super funds reporting more regularly to the ATO, it gives employees greater visibility of their entitlements through myGov. They will also have more information prefilled on myTax.
The on-boarding process will become easier for new employees if you give them the option to electronically complete a pre-filled tax file number declaration and superannuation form online.
Have you completed your headcount?
You are required to conduct a headcount of employees on 1 April 2018. If you have 20 or more employees on this date, your business is required to commence STP on 1 July 2018.
How to set up single touch payroll
The ATO has created a range of resources (including a checklist) explaining the change and what’s required of your business. Your payroll software provider will also explain the changes and updates to their system.
Unfortunately, in the 2017-18 Mid-Year Economic and Fiscal Outlook (MYEFO), the Government announced that it will not be proceeding with the $100 non-refundable tax offset for Standard Business Reporting (SBR) enabled software (this includes things like accounting software).
The ATO advises those who don’t already use payroll software should sign up with a provider, or speak to their tax or BAS agent for advice on which products might be suitable. Many of the major payroll companies offer small businesses their software at no or little cost, so it’s worth shopping around.
What else should you be prepared for? Talk to Prospa on 1300 882 867 or apply online for a small business loan to future-proof your business.