What is Single Touch Payroll?
Single Touch Payroll or most frequently called STP, is a newly introduced digital system of reporting payroll data to the Australian Taxation Office (ATO). The system brings much needed transparency and fluidity of the payroll information in Australia.
Before STP was introduced in 2018, all businesses were reporting their payroll data every month, quarter or annually. This was an efficient but slow system in terms of transferring data. It carried lots of loopholes and lacked the fluidity of transferring information from business to ATO. Thus, ATO introduced STP.
STP allows mandatory reporting of each employee payroll activity after each pay day. The reports use digital submission, using a very specific format. The STP system are provided by most of the readily available accounting software.
How Single Touch Payroll Works?
Basically, when STP runs at every pay day, the software sends payroll data such as gross earnings, PAYG withheld and superannuation to ATO.
On each pay day, employer determines the pay for each employee. Then they run normal pay run through a STP compliant software. The software then calculates the payroll tax and superannuation as required by the employers. Once the pay run is complete the employer sends payslips to each employee, either via email or post and makes the payment to employee. Then, the software sends all the payroll data to ATO.
At every pay day, ATO receives the data and matches the information with the pre-existing employer and employee records. Employees will be able to view their year to date earnings and superannuation information in ATO online services (www.my.gov.au). At the end of the year, employees no longer need the PAYG Summary for their tax return as all the information is readily available online.
The employer will be reporting Super liability information through STP and Super funds will also be reporting to ATO. The Super funds will let ATO know once the employer makes Super payment to employees’ chosen or default fund. This is an important step toward making sure employees are paid their correct entitlements.
Made a mistake? Employers are allowed rectify their errors in the following report. There are no penalties for rectifying a mistake.
What It Means to Businesses?
The key benefit for employers and business using Single Touch Payroll is that it will streamline the reporting process. Long are the days gone when information was used to be reconciled at the end of the year and issue PAYG summary. The mistakes and time taken to prepare this information will drastically reduced as STP takes control of reporting at each pay day.
Also, ATO will automatically pre-fill the payroll information in the BAS (W1 and W2) for employers. This will potentially eliminate all errors and double handling. Eventually, eliminating the need to issue the PAYG summary at the end of the year.
What It Means to Employees?
The STP implementation provides employees their instant access to their year to date earnings super information that their employers have paid. All they need is a login to www.my.gov.au .
The payment summaries will no longer be provided by the employers at end of the financial year. The data will be readily available in the My Gov account of the employee. Every employee will be able to request a copy of income statement from ATO from www.my.gov.au. Also, the authorised tax agents will be able to access your income statement directly from their tax agent portal. Therefore, no need of hassling in search of group certificates at the tax time.
More importantly, an employee will be able to check if their super has been paid. Prior to STP implementation, employees were in dark in terms of their super, but now all the information are just a click away.
When is STP to be Implemented as a Mandatory Payroll Reporting System?
For larger employers with 20 or more, employees should now be reporting through STP. It came into effect since 1st July 2018.
For small employers with 5 -19 should start reporting through STP from 1st of July 2019.
For employers with 1- 4 employees (micro-employers), there are number of low cost or no cost software available to report STP. They will be able to lodge the payroll through tax or BAS agents quarterly, rather than at each pay period. However, this option will only be available until 30th June 2021.
Which Software Provides STP Feature?
Big and popular accounting software such as Xero and MYOB have integrated STP within their Payroll processing feature without any extra charges. Other providers such as Quickbooks and Reckon also provide STP reporting at minimal cost. On top of this, there are list of software providers that provide low-cost or no-cost STP reporting. You can follow the link here.
There are no hard and fast rules in choosing a right software provider. All of them must be approved by ATO and can be adopted for your business for STP reporting.
Our thoughts on STP
Single Touch Payroll is ATO latest reporting system implemented to introduce transparency and free flow of payroll data. With the introduction of STP individuals, related government organisations and authorised parties can access to an individual’s income data instantly and with confidence.
STP will practically eliminate all the errors, double handling and potential fraud income declaration. The system will be very helpful to the organisations such as credit providers, immigration department, financial institution, Centrelink and tax agents.
Technology ridden modern world require paperless, free flowing information readily available in the hand. Thus, we think that introduction of STP is a good move by ATO in transforming Australia into digital age.
How BLC Training Can Support You with STP Change?
BLC Training has teamed up with our business partner –Lotus Smart Accounting to deliver a series of info sessions on the topic of Single Touch Payroll. We understand the move to real-time digital reporting maybe a big change for both business owners and accountants, so join us for this info session to help you understand what you need to do to prepare for this changes coming to you from 1st July 2019. Check out the upcoming events on our Facebook Page.