The Single Touch Payroll (STP) measures commence on 1 July 2018 for employers with 20 or more employees (referred to as ‘substantial employers’), therefore effected employers need to act immediately to ensure that systems and processes are ready.
What is changing?
Practically, the STP measures represent a significant change to payroll reporting requirements, and effected employers will be required to transmit data to the ATO as and when employees are paid, including salaries and wages paid, Pay-As-You-Go (‘PAYG’) tax withheld on those salaries and wages, and what superannuation will be contributed on the employees’ behalf. It is important to note that the STP measures only affect reporting requirements. Payment dates, methods and payroll cycles are unchanged by the STP measures.
Apart from concurrent reporting, another key change with the arrival of STP is the abolition of the requirement to provide payment summaries to most employees. Instead, employees will use myGov to access all pay, PAYG and superannuation information in ‘real time’ throughout the year. Payment summaries must still be prepared to report reportable employer superannuation contributions and reportable fringe benefit amounts.
All reporting under STP must be done electronically. Thus, effected employers will need to ensure that their payroll software has the functionality to handle the requirements, and upgrade if necessary.
Who is affected?
STP reporting is mandatory from 1 July 2018 for employers that have 20 or more employees on the payroll on 1 April 2018. If you have 19 or less employees, Single Touch Payroll reporting will be optional until 1 July 2019. It will be mandatory from that date, subject to legislation being passed in Parliament.
The number of employees an employer has on 1 April 2018 is determined on headcount, rather than on a full-time equivalent, or some other basis. The headcount includes full-time, part-time, and casual employees, as well as employees on leave (both paid and unpaid), employees working overseas, and seasonal employees.
The headcount should exclude both employees who ceased employment before 1 April 2018 and any casual employees who did not work in March 2018, along with independent contractors, labour hire staff, and company directors and office-holders.
Once the 20-employee headcount threshold is met, an employer remains a STP employer even if the number of its employees subsequently drops below 20.
What are you doing to get ready for Single Touch Payroll?
While the ATO is doing its best to smooth the transition, responsibility for STP ultimately rests with employers in ensuring they are ready to go from 1 July 2018.
If you have yet to turn your attention to STP, with just under 4 months remaining, we would recommend it becomes a key focus. We have included some tips to guide you:
- Determine whether you are likely to be a ‘substantial’ or ‘non-substantial’ employer and plan your timeline accordingly:
- Substantial employers are required to be ready for STP by 1 July 2018; and
- Non-substantial employers (i.e. those with less than 20 employees) are required to be ready by 1 July 2019;
- Engage with your payroll software provider to determine when their STP solution will be ready (in discussions with providers we have found that many are still in a consultation phase with the ATO to affirm their product is compliant);
- Ensure your payroll system is up to date prior to your commencement date:
- Review your payroll system to ensure all PAYG Withholding and Superannuation configurations are correct (e.g. tax scales, PAYG variations, superannuation fund details, salary sacrifice arrangements);
- Review your payroll wage component configurations to ensure they are aligned with the ATO view of taxable and non-taxable payments for PAYG Withholding purposes and ‘ordinary time earnings’ for Superannuation Guarantee purposes;
- Align any calculations performed external to the payroll system, for example, termination payments and back-pay, to ensure they will be captured; and
- Consider your payroll on-boarding processes, as existing processes may require adjustment to operate effectively within the STP environment. For example, TFN declarations and super standard choice forms will be available online.
It is imperative in the lead up to STP’s commencement on 1 July 2018 to ensure your payroll system is up to date and complies with all obligations. One way to ensure this is to have an independent review conducted by external advisors.
If you have any questions on STP, please contact your MPT Group Accountants & Advisors Tax expert. You can also visit https://www.ato.gov.au/business/Single-Touch-Payroll for the latest updates.