Have you heard about STP but don’t really understand what it means for you?
Single touch payroll is a new regulation that changes when and how small businesses report payroll activity to the Australian Tax Office
According to the ATO many small businesses use some combination of spreadsheets, paper resources, sticky notes to process payroll and some 90,000 micro-businesses use no software whatever. I can’t imagine doing all this without accounting software of some sort.
The ATO recently announced that from 1 July 2019 EVERY employer in Australia must report to the ATO whenever they make a payment to their employees. For small business this means that you will need to be using a STP (Single Touch Payroll) compliant software.
If you have less than 19 employees, the changes that happened may have slipped by you, but from July all employers will need to follow this system.
The ATO state that extending STP to all employers will help ensure all Australians get their full superannuation entitlements, give greater transparency and help ensure a level playing field for small business. This initiative is also an important step in streamlining business reporting and keeping pace with the digital age.
How will this affect you?
For some businesses, the only change you’ll need to make is reporting more frequently instead of once at the end of a financial year. If you currently use payroll or accounting software that offers Single Touch Payroll, like Xero, then you can start reporting any time.
Because you’ll be updating the ATO on a pay-by-pay basis, you won’t need to prepare employee payment summaries or payment summary annual report anymore. You’ll just let the ATO know when you’ve made your last pay run of the financial year for your employees.
Also, your employees will be able to see the information that would normally be on their payment summary by logging on to myGov site.
To be clear this is separate from BAS and EOFY obligation, which you will still need to do as usual.
Your options for switching to single touch payroll.
To be ready for the switch, you’ll need to make sure you can submit compliant reports every payday. Here’s what it means:
If you use online payroll software, it should be able to handle the job. Just make sure it produces ATO-compliant reports.
If you use desktop payroll software, you’ll need to find a service that can upload your payroll reports, convert them into the ATO’s required format and submit them on your behalf.
If you use spreadsheets or pen and paper, you’ll need to find a service to convert the data into a compliant digital report format and submit it on your behalf.
But there isn’t much you need to do if you are already using Xero, STP compliance is part of the Xero payroll product offering. Xero’s STP solution is simple and beautiful and has been endorsed for use by the ATO. It is available to all small business owners, as part of a broader legislative move toward the digitisation of business.
If you are a micro business and are concerned about costs the ATO is working with software providers to develop low and no-cost reporting solutions including simple payroll solutions, portals and mobile apps. You can find details on these solutions on the ATO website at: https://www.ato.gov.au/business/single-touch-payroll/in-detail/low-cost-single-touch-payroll-solutions/
If you would like some help in deciding the right package for you or getting set up, I’m here to help just get in touch by the contact form or my facebook page.