In only a matter of months all employers will be required to comply with the Single Touch Payroll (STP) provisions.
As you would already be aware, to date, only employers with 20 or more employees are required to comply with STP provisions. However, effective from 1 July 2019, it will be mandatory for all employers, (including those with less than 20 employees) to comply with this system. Note: “Micro employers” (1-4 employees) may initially have access to different options including initially allowing their registered tax agent to report quarterly on their behalf.
Therefore, if you have not already done so, it is important to take the time to prepare your business for this upcoming mandatory change.
What is Single Touch Payroll?
STP is a new way for employers to report their PAYG and super contribution information to the ATO after every pay run (unlike previous reporting which was done either monthly or quarterly and super contributions were not reported).
If you are using payroll software, it is highly likely that it will already be STP ready, however it is recommended that you take steps to ensure your business and systems are STP ready.
The ATO, your accountant or payroll provider will be able to support you with matters such as:
- Confirming whether your current payroll provider is Single Touch Payroll compliant
- Confirming whether you meet the ATOs exemption classifications (where applicable)
- Documenting how your pay codes should be classified to ensure tax, superannuation and workers compensation compliance.
- Reviewing 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).
- Aligning any calculations performed external to the payroll system (i.e. Termination payments and back-pay) to ensure they will be correctly captured.
- Whether there are any impacts on any other software or systems that currently integrate into your payroll system.
You have not yet received advice regarding the requirements for Single Touch Payroll from your accountant or payroll provider, we recommend that you contact them directly to obtain further
What do I need to be aware of?
According to the ATO, Single Touch Payroll information will be used to prefill your activity statement in the future. However, it is anticipated that the introduction of the STP will result in an increased focus on monitoring and enforcing employer compliance from external agencies, particularly in relation to the auditing of activities surrounding PAYG Withholding and Superannuation.
As the STP system will see the ATO being provided with real time access to a level of information that has not previously been made available to them, they will have greater capacity to:
- To inspect information provided and target non-compliant employers.
- Recognise and deploy early assistance to employers who are struggling to meet their employer obligations.
- Ensure that superannuation funds are reporting contributions received more frequently (at least monthly) which will enable the identification of non-compliance and the taking of prompt action.
- Strengthen their recovery powers to ensure that unpaid superannuation is better collected; and
- Seek court-ordered penalties in serious cases of non-payment.
Similarly, the current targeting of employer compliance within particular industries by the ATO, Fair Work and WorkCover is expected to continue, if not increase, under this system. While privacy legislation may prevent the direct sharing of employee information between each agency, data sharing arrangements may allow for the sharing of algorithms which can identify what information is flagged. This increases the likelihood that such agencies will be able work together collaboratively using the real time data. Therefore, it is essential that you have the systems and processes surrounding payroll right so that each pay run is correct and that you are confident in the data that is being provided to the ATO.
In addition to reviewing and confirming your payroll system requirements or payroll processes, it is recommended that steps also be taken to review the Human Resource practices and processes which support the collection and processing of your payroll and employee entitlements. In particular, it is recommended that you:
- Review your current payroll reporting and validation process to identify any data or procedural gaps and to identify any improvements which may be required.
- Ensure that current employee onboarding process capture the information required, including collection of the individual’s tax file numbers within 14 days of their commencement date.
- Review your current superannuation processing practices to ensure the timely capture of employee fund details.
- Validate that the data captured on your current timesheets is reliable.
To ensure that both your payroll systems and Human Resource practices are compliant and current, it is recommended that an audit be conducted of your current systems in the lead up to the commencement of Single Touch Payroll on 1 July 2019. HR Advice Online can support our clients through conducting an independent HR Audit of your HR processes on a fee for service basis.