Business owners will need to be aware of the Single Touch Payroll (STP). The Single Touch Payroll is an initiative by the Australian Tax Office (ATO) that hopes to provide better accuracy and timeliness on a business’ payroll processes. Among the things that it is aimed to help businesses with include payroll and taxation.
Companies Reporting Via STP
This initiative has a goal of streamlining business reporting obligations by organisations. Those employers that have 20 or more employees are supposed to report by STP. This already started in July 2018.
As for those small businesses that don’t have 20 employees (*including former employees in your firm), they have the option whether or not that they report using the STP, at least for now. However, it is suggested that they also learn how to do it via STP enabled software since it is also going to extend to them by July 2019.
How Do You Count Your Employees?
Both part-time and full-time employees will be counted in your payroll. Also, when it comes to casual employees along with seasonal employees, you will have to check the exemptions. This applies to employees who were hired only for a short period of time or perhaps are no longer within your organisation
If you have employees who are based abroad or if there are employees who are currently on leave, they are still part of the headcount.
As for those who are not going to be included in the headcount, it includes the following:
- Employees who stopped working before April 1
- Independent contractors may be included – more info https://www.ato.gov.au/
- Casual employees who weren’t working in March
- Company directors
- Manpower provided by third-party labour hire companies
- Religious practitioners
How Does STP Work?
Whenever a business pays the employee, the STP-enabled software is going to send the tax and super information. The good news is that the pay cycle doesn’t have to change. It is still possible for companies to pay their employees monthly, weekly, or every fortnightly.
The report is going to include the salary of your employees, along with deductions and allowances, and other payments.
To make sure that everything is going to run smoothly, you will need to know what is mandatory to report, and what is voluntary to report. For things that are mandatory to report, it includes payment given to employees, unused leave payment, and even payment to a religious practitioner. On the other hand, those things that you can voluntary report include the payment for the termination of employment, payment that is covered under any voluntary agreement, and lastly, payment under a labour hire arrangement.
Now, when it comes to the payments under mandatory declaration, you will need to make sure that you are going to complete a finalisation declaration. Here, it is going to include the payment summaries made to the employees of your company.
The finalisation declaration will be given to the Commissioner of Taxation on July 14. Here, you will be stating that you have already reported for the financial year.
Now, if you happened to not give a report and finalised the amounts using the STP, then, your business will then be required to provide a payment summary to the employees of your company. Also, you will be submitting the payment summary annual report to the commissioner.
What Can’t Be Reported by the STP?
There are some payments that can’t be reported via the STP. It includes the payments that are not paid in the payroll process. Also, if the payments were made to those that aren’t employees, you don’t have to include it in your STP. For instance, payments that were made on investment funds or purchases that are considered taxable. For these things, businesses will still be required to provide payment summaries as well as an annual report to the Commissioner for these types of payments.
You also can’t include those that are not considered withholding payment even if it is made via the payroll software.
Talk to Your Software Provider
STP reporting is offered by payroll software providers. You will have to talk to them in order to know whether or not they can simply update your existing software. There is also a chance that you will have to pay for additional service in order to include STP reporting on your software. Two major players in Australia Xero and MYOB has reported being ready for STP.
To make sure that things are going to run smoothly, be sure to find out the type of support that they can provide to clients looking to transition to STP. Try to read their communications as well if they made an announcement via Facebook or even via email.
Now, if you are still not ready, then you will also need to apply for a deferred start date to apply the STP. If the software isn’t ready, then the software company is going to provide you with a deferral reference number as well as a new starting date.