Since September 30, every small and micro business in Australia needs to report payments to the ATO whenever they do a pay run. Here’s what you need to know.
Is your business ready for the Single Touch Payroll revolution?
Single Touch Payroll (STP), also known as real-time payroll reporting, is here – for every business owner in Australia. While businesses of all sizes have long had to provide activity statements to the (ATO) detailing the wages they’ve paid, the super contributions they’ve made and the PAYG tax they’ve deducted, historically, there has been a time lag between these ‘pay events’ occurring and the ATO being notified of them. That changed since September 30 2019, when every business will be required to provide those details immediately after a pay event occurs.
Businesses with 20 or more employees have had to be STP-compliant since July 1, 2018. From September 30, 2019, businesses with 19 or fewer employees will also need to move towards becoming STP-compliant. In the next few weeks, business owners are likely to receive an email from the ATO, or their accounting software provider or accountant, warning them of what’s been described as the “biggest compliance undertaking since the GST”.
If you’re unaware of this important change, you’re not alone. A YouGov Galaxy survey conducted earlier this year found 70 per cent of business owners who need to implement STP had “no idea what’s ahead of them” and 55 per cent had “little knowledge” on how to become compliant.
What business owners need to do
There is good news if you own one of the 730,000 businesses that shortly needed to implement STP.
Though the new arrangements technically started on September 30, the ATO has stated: “The first year is a transition and penalties generally will not apply”. Certain businesses, such as those without a reliable internet connection, can apply for exemptions and deferrals. Micro businesses (i.e. ones employing four or fewer people) that want to still manually process payroll transactions and send quarterly activity statements to the ATO can do this until June 30, 2021.
That noted, the ATO does expect business owners to do the following in the near future:
- Decide how they will report through STP You’ll have to supply the ATO with the required information but there are several ways you can choose to do this. You may already have payroll or accounting software that can send STP reports to the ATO. Alternatively, your payroll service provider or registered tax or BAS agent may be able to take care of this for you. There are also cheap or free (see below) STP solutions you can implement.
- Determine who will authorise and send STP reports Business owners and public officers have authority to send reports. If you want a payroll manager or payroll service provider or registered tax or BAS agent to send STP reports, you’ll need to authorise them to do this.
- Make sure your software can connect with the ATO’s If you’re using software to send STP reports, you, or your registered agent, will need to let the ATO know your ‘software service ID’ (SSID). This can be done by calling 1300 852 232. (Your SSID is usually displayed by your software when it’s preparing to generate an STP report).
- Check your records are up to date The information you supply must be accurate. Check you are paying staff correctly, calculating their super entitlements accurately and have error-free records of their names, addresses and dates of birth.
- Low-cost and no-cost solutions The ATO has worked with a range of stakeholders to ensure micro businesses that don’t have STP-ready software can access STP solutions (i.e. mobile apps, cloud/web/desktop-based products and portals) for under $10 a month. Or, in some cases, at no cost at all.
Becoming STP-compliant may be a headache for many time-poor business owners, but it should be short-term pain for long-term gain. Once the appropriate systems are set up, many business owners are likely to benefit from the automation of their payroll and tax-reporting responsibilities.
For more information, see the ATO’s detailed information on Single Touch Payroll and how to ready for it.