Understanding Single Touch Payroll

By Peter Vickers Business Group | small business, Accounting, tax |

Single Touch Payroll is now mandatory for large businesses (those with 20 employees or more) and will soon be compulsory for all businesses. The ATO has extended its deadline for small businesses to implement STP until 30 September but a recent survey has found 70% have no idea what’s ahead of them and more than half (55%) have “little knowledge” about how to become compliant.

We’ve written this brief guide to help businesses owners understand Single Touch Payroll and the benefits it will bring to businesses. We’ve also made a brief video with our accounting experts explaining how to get started with Single Touch Payroll.

While we hope this guide is useful, do remember that each of your businesses is unique and will have its own specific requirements. If you do have any questions or queries please get in touch with us directly and we will be more than happy to help.

 

What is Single Touch Payroll or STP?

Single Touch Payroll (STP) is an initiative by the ATO and is essentially digitising the payroll process for both employers and employees.

Single touch payroll changes the way employers report on employee payments including salary and wages, PAYG withholding and superannuation.

STP sends tax and superannuation data directly to the ATO every payday, helping the tax office keep closer eye on employers and protect workers from bosses who fail to pay super.


How does it work?

It’s very simple once implemented. You will pay your employees as normal (weekly, fortnightly or monthly) and give them a payslip. 

As your run your regular payroll, your STP-enabled payroll software sends a report directly to the ATO which includes required information such as salaries and wages, PAYG withholding and super.

The most significant effect will be on superannuation reporting. Previously this was done annually via the PAYG summaries or group certificates. It will now be reported to the ATO with every pay day. Importantly, the way that PAYG withholdings, GST and super are paid to the ATO will not change.


What is the deadline for implementing STP?

Larger businesses – so those with 20 or more employees – will already have to be reporting using STP.

However, the ATO found that many small businesses were unprepared for STP and so has extended the deadline to 30 Sept 2019. What this date basically means is that if it’s mid-September and you still haven’t organised your STP, you should apply to the ATO for an extension, or ask us to apply on your behalf.


What is the benefit to business owners?

Our accountants believe that the biggest benefit that will come from this for small businesses is that it will energise owners to make the upgrade to cloud based accounting software such as Xero or MYOB Accountright.

A recent survey commissioned by Intuit of over 500 small businesses found that converting to payroll software saved them more than 2 hours per week. The other functions of these systems can save even more time. A great example is an automatic function that will email statements to clients with overdue invoices.

Perhaps the biggest advantage of moving to cloud based bookkeeping software, is that we as tax agents and bookkeepers are able to access your files at any time, checking for errors or even doing your bookkeeping for you!

The other benefits include:

  • Under STP, employers send payroll information to the ATO at the same time as they pay their employees. This saves you time and resources at the end of the financial year because you’ve already submitted payroll information to the ATO throughout the year.
  • The ATO will pre-fill payroll fields W1 & W2 in your BAS. As everything is electronic the ATO already has the information from you, reducing potential errors and double handling.
  • You are no longer required to generate and distribute payment summaries to employees as this information will be available online via myGov.
  • You can on-board new employees quickly with online commencement forms including Tax File Number Declaration and SuperChoice


How do businesses owners get started with STP?

Firstly business owners must set up their payroll and determine how you will report through STP. Because you’re required to send additional reporting to the ATO, many employers will need to upgrade or replace their payroll system to meet their payroll reporting obligations to the ATO.

You can report your Single Touch Payroll through a payroll or accounting software, registered tax or BAS agent who reports on your behalf or a low cost STP solution.


Can you explain the three different options?

If you are on a large bookkeeping provider subscription such as MYOB accountright or Xero, single touch payroll will be easy to set up and use. Remember to find out what support they will give you to help your transition to STP, upgrade or install your software when ready and subscribe to their communications so you don’t miss an update. Peter Vickers Business Group is also a MYOB and Xero partner so if you choose to use this software we can assist you with any queries you may have.

If the outlay of 25-100$ /month (for the large software subscription) depending on business size is too much, and you want to keep your current bookkeeping system that doesn’t offer single touch payroll, there are many low and no cost options available. Our bookkeepers at PVA recommend Reckon as a trusted provider for this, they have a free mobile app that covers 1-4 employees, or unlimited employees for $5/month.

Of course you can always pass on your bookkeeping and payroll duties to one of our bookkeepers at Peter Vickers Business Group and we can report on your behalf.

It’s important for businesses owners to know that whichever of these options they choose, to be compliant with the ATO's requirements, they’ll need to connect their accounting process to the ATO's portal. This will involve a call to the ATO, but again we are more than happy to help and liaise with the ATO on your behalf.


What about Peter Vickers Business Group clients that own their own business and rely on their accountant works out their salary at the end of the year? Their pay details won’t be known until the year’s profit has been determined?

There is very good news here. Owners of a business and their immediate family members are excluded from STP requirements. The ATO defines these employees as “Closely held payees”. You will be able to submit a PAYG summary at the end of the year after the accountant has determined the year’s profit and salary as per usual.


The good news is that there is plenty of support available to help employers get set up with Single Touch Payroll.

Peter Vickers Business Group has been helping our clients become STP compliant and ensure they have the correct systems in place. We also have bookkeepers who can help you get started with payroll and any other financial support you need, so you can focus on growing your business.

It’s important to remember that each business is unique and so there isn’t a one size fits all solution when it comes to payroll. We work with you to understand your specific business needs so please don’t hesitate to get in touch to speak to one of our bookkeeping and accounting experts.


Unsure about how to utilise the instant asset write off? We've outlined how businesses, can take advantage of this handy tax benefit, learn how here.

If you’d like more information on how to grow your business, please contact one of our accounting and tax experts using the button below.

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