Single Touch Payroll (STP) - What is it and how does it work?
Unless you've been living under a rock, by now you should have heard about STP, and that it requires something of you. So what is it and how does it work?
STP is an ATO initiative to establish real time digital salary reporting for employees. This means that as an employer, you'll now be required to report salaries and wages, PAYG withholding, and superannuation information every time you pay your employees, using a very specific format. If you haven't already, download the ATO's 'Get ready checklist'.
For employees, they can track their earnings through a myGov account.
Micro employers (1 - 4 employees)
If you don't currently use payroll software, the are a number of no-cost and low-cost software solutions. (Details of those can be found here). Or, your registered tax or BAS agent can report your STP information quarterly, rather than each time you run payroll.
Small business employers (5 - 19 employees)
Those businesses with 5 - 19 employees have the option to have already begun reporting, do so any time before 30 September 2019, or apply for more time to get ready.
Large business employers (20 or more employees)
STP commenced on 1 July 2018. The ATO has allowed a 12 month transition period to start reporting by 30 June 2019.
Closely held payees
A closely held payee means the payee is directly related to the entity from which they receive payments, such as family members of a family-owned business; directors or shareholders of a company, and trustees or beneficiaries of a trust. If you report quarterly, you will need to send your STP report once per quarter at the same time you lodge your activity statement. Again, this is done using STP enabled software, or your tax or BAS agent.
How does it all work?
Once you've connected you payroll software to the ATO, keep processing your payroll as normal. After you process a pay, you'll now have to send the payroll information to the ATO. To do this your software can connect directly to the ATO using an AUSkey (more commonly for larger businesses), or your software may connect to the ATO using a software service ID (SSID). You can check the ATO Business Portals for prior lodgments.
When it comes to the end of the financial year, you no longer need to prepare Payment Summaries for the employees, or the summary for the ATO. These are all accessed digitally - for the employee it is through their myGov account. You'll need to finalise your employees' information by 14 July each year. The sooner you finalise, the sooner the employee can lodge their tax return.
What happens if I make a mistake?
Don't fret!!! You can submit an update event in your STP-enabled solution.
During the first year, the ATO has said they will not pursue penalties when businesses are making the effort to do their best to comply with the law. As John Shepherd, the ATO's Assistant Commissioner for the Singe Touch Payroll Program explains, 'We don't want to apply any penalties in the first year, so what we need is for people to actively engage, including if they feel they will need more time.' And if you need help - either with reporting or paying, it's better if you're proactive about it. The sooner you talk to someone about it, the sooner it can be fixed.
If in doubt, ask a question. It's easier (and better) to get things right the first time than having to fix it up later.
Kirsty Fox is the Principal of Spitfire Accounting Solutions, which runs the Tradies Accounting Toolshed. Should you have any queries, please do not hesitate to contact her here.
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