Single Touch Payroll is almost here and will change the way you report payroll information to the Australian Tax Office (ATO).
As a private practitioner, if you employ anyone within your practice or at home (such as a nanny or a spouse doing your administration work), STP will affect you.
From 1 July 2019, new legislation requires employers to report salary, wages, Pay As You Go withholding and super information directly from compliant payroll software to the ATO.
How will you be impacted?
If your payroll processes are currently manual
If you or your practice are not using any payroll software, you need to be set up on compliant software as soon as possible or consider outsourcing your payroll reporting to a third-party service (such as a bookkeeper).
There are many software options available to consider depending on the complexity of your needs. Your accountant should be able to point you in the right direction based on your individual circumstances.
Once you’ve decided on a software product for your practice, your payroll processes will need to be adapted.
If you’re already using payroll software
If your practice is already using software, make sure that it’s STP enabled and start using the payroll function for your reporting. If it’s not STP compliant, it will need to be upgraded or replaced with STP ready software.
If you’re currently reporting via a third-party service
Confirm that they are using an STP compliant software. If not, find out when they will be upgrading their software otherwise you’ll need to consider switching to another provider.
You should also clarify whether they will be lodging the payroll reports to the ATO on your behalf or simply preparing the reports for you to submit.
How will Single Touch Payroll change your payroll processes?
Instead of lodging employee payroll information to the ATO at the end of the financial year, employers are now required to report this each pay run, through the payroll component of their STP enabled software. Moving forward, the ATO will be using STP reporting as the sole record of salary and wages paid, taxes collected, and superannuation contributed.
So when do you need to start reporting by?
The ATO has extended the STP deadline for small businesses to 30 September 2019.
If your practice won’t be ready to start reporting by then, you will need to apply to the ATO for a deferred start date.
There are limited businesses that may be eligible for flexible reporting options (i.e. if you live in an area with intermittent or no internet connection) but you will need to apply for an exemption with the ATO. Visit the ATO website for more information about the type of businesses that may qualify.
Benefits of moving to Single Touch Payroll
While adapting to the STP changes may be painful initially, there are a number of benefits which will save you time and resources in the long run.
- As you’ll be reporting payroll information to the ATO on a pay-by-pay basis, you will no longer need to prepare a payment summary annual report. Once you’ve made your last pay run for the financial year, simply notify the ATO and you’re done for the year!
- The ATO will pre-fill PAYG withholding payroll fields W1 & W2 in your BAS, which will eliminate any potential for error moving forward.
- You are no longer required to generate and distribute payment summaries to employees. Employees will automatically be able to see their YTD tax and superannuation information when they log in to their myGov account.
- The STP changes should streamline your on-boarding process for new employees with a number of online commencement forms available including Tax File Number Declaration and SuperChoice.
So what should you be doing to make sure that your practice is Single Touch Payroll ready?
- Make sure the ATO has the correct details for your business
- Check out the resources on the ATO website and subscribe to receive any STP updates
- Ensure your practice is set up with STP compliant software by 30 September 2019
- Make sure payroll employees are aware of the new process for reporting payroll information to the ATO each pay run
- Confirm that your employee’s information is up-to-date (including name, date of birth, address and tax file number)
- Check that you’re paying your employees correctly and calculating PAYG withholding and superannuation amounts accordingly
- Inform your employees about the upcoming change and let them know that they can access up-to-date payment information through their MyGov account
- Ensure that your employee onboarding processes are updated to account for the STP changes
If you have any questions about Single Touch Payroll or would like to talk to someone about getting your practice ready for the change, call us on 1800 DPM DPM or visit our website to book a no-obligation initial consultation.
The information contained in this article is general and is not intended to serve as advice. Your individual needs have not been considered and you should not act or fail to act on the basis of the information contained in this article. Any views expressed in this article are opinions of the author at the time of writing. The information in this article is believed to be accurate at the time of publication. The information in this article has been approved by Doquile Perrett Meade Partnership ABN 96 821 307 818. DPM Financial Services Group recommend you obtain advice concerning specific matters before making a decision.