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Since 1 July 2019, the Australian Tax office (ATO) requires employers to report any salaries and wages paid, plus PAYG withholding and superannuation information, on a regular basis throughout the year; under a reporting regime called Single Touch Payroll (STP).
Previously only large employers with 20+ employees were required to report through STP, while small employers with 19 or fewer employees were only required to report employee wage and superannuation to the ATO on an annual basis at the end of the financial year.
The ATO states “STP offers the ability to streamline your reporting as opposed to having a number of separate reporting processes, to help you achieve efficiencies of real-time reporting and help with your compliance processes.” Essentially, it’s a new way for employers to report tax and super information to the Tax Office every time you pay your employees.
STP applies to:
A payment to an employee, such as salary or wages
Remuneration to the director of a company
Return-to-work payment to an individual
Termination payments to employees
Unused leave paid
Parental leave pay
Payment to an employee under the Seasonal Labour Mobility Program
Other non-mandatory details that can also be provided to the ATO under STP reporting include:
Reportable employer superannuation contributions
Reportable fringe benefit amounts for employees
Payments made to contractors outside the payroll (contractors paid through the payroll are to be reported through STP)
Salary, wage, PAYG and superannuation details must be sent to the ATO each time an employer pays its employees. The method of reporting can be either:
Directly from STP-enabled payroll software, which will send a report to the ATO (You will need to check whether your software provider offers STP-enabled products. If not, you will need to find a provider who does), or
Through a third party such as H&R Block, who can act as an external service provider and will report on your behalf. This could be a registered tax or BAS agent, or payroll service who is a registered tax or BAS agent provider.
If you do not use accounting or payroll software that offers STP you can:
Apply to the ATO for more time to get ready, using the ATO’s online forms to apply for a deferred start date
Ask the ATO for an exemption if you live in an area with intermittent or no internet connection, or
If a micro-employer with 4 or less employees, use ‘low-cost STP solution’ at than $10 / month.
If your business doesn’t yet have STP compliant payroll software, talk to H&R Business Services who can help with the transition and, if required, put in place a plan to manage your move to STP over a longer timescale with the ATO on your behalf, including applying for a deferral for your business if required.
CLOSELY HELD PAYEES
These include payments to those directly related to an entity from which they receive payments (and often not paid regularly) including:
Family members of a family-owned business
Directors or shareholders of a company
Trustees or beneficiaries of a trust
For these types of payments, businesses will need to make reasonable estimates each quarter of the amounts paid to closely held payees. These amounts can be calculated using one of the following methods:
Actual withdrawals (not including payments of dividends or which reduces the liabilities owed by the business entity to the closely held employee)
25% of the salary/director fees from the previous year per quarter
A variation of the previous years’ amount (that takes into account trading conditions) within 15% of the total salary for the current financial year
These methods are calculated in the same way you would calculate pay as you go (PAYG) instalments.
With STP, employees are able to see their year-to-date tax and super information on the ATO’s online service, accessed through myGov and updated on STP reports.
Once details are reported and finalised through STP, employers are not required to provide employees with an annual payment summary. When finalised, employees or their registered agent will be able to lodge their tax return using the STP information available in ATO online. The ATO will pre-fill activity statements with the details reported through STP.
WHAT IS THE BENEFIT OF SINGLE TOUCH PAYROLL?
Previously, employers had to give their employees payment summaries to enable the employees to complete their individual tax returns and submit a payment summary annual report to the tax office after the financial year ended. With STP, employers will no longer need to give payment summaries to employees and lodge payment summary annual report forms to the tax office.
When employers start using STP payroll software, employees will be able to view their payroll information online from their MyGov account after the employer files pay details each time to the Tax Office through STP payroll software. The payroll information will then be prefilled in the employee individual tax return at financial year end. Employers will have to 'finalise' the employees' EOFY payroll information through the STP enabled software by 14 July 2020 for 2019-20 year.
This action has been taken by the government to improve compliance around pay as you go (PAYG) tax withheld and employer super guarantee payments to employees.
GET EXPERT HELP
H&R Block can assist with setting you up for STP reporting to the ATO or, alternatively, assisting with your STP obligations as a registered tax and BAS agent.
Our H&R Block accountants are now working online. Book an appointment with an expert.