Key Takeaways

• ATO has rolled out Single Touch Payroll or STP for businesses with 20 or more employees.
• Businesses are required to report to the ATO every time they pay their employees sending data such as salaries, deductions and super. 
• Talk to your accountant or software provider to ensure you are complying. 

If you’re a business owner, you should hopefully know by now that the ATO’s Single Touch Payroll (STP) started on 1 July this year. STP requires businesses with 20 or more employees to report to the ATO certain payroll information via Standard Business Reporting software.

The tax office has reported that 40,000 businesses are already using STP. And as of 1 July 2019, small Aussie businesses will also need to be compliant.

The STP initiative is part of the federal government’s “Digital by Default” program, which has been introduced to provide real-time visibility over an organisation’s payroll processes. It’s intended to simplify reporting and reduce the administrative burden and cost by simplifying tax and super reporting obligations while improving the visibility of employer non-compliance.

Australia isn’t the first to require STP compliance, with the UK successfully implementing its own version of STP more than five years ago. STP also helps to address the huge unpaid super issue in Australia by making it easier for the ATO to track super payments.

Did you know that Australian employers failed to pay their workers $17 billion in superannuation between 2011 and 2017?

How does STP work?

Under STP, employers will need to report to the ATO each time they pay their employees. The software will be linked to the employer’s payroll system or its outsourced payroll provider’s system. The information sent will include salaries and wages, allowances, deductions such as workplace giving and superannuation data.

This means that payment summaries will no longer need to be provided to employees for the payments’ employers report through STP. Instead, employees will be able to view their payment information in ATO online services, which they can access through their myGov account.

STP gives the ATO more information for data matching purposes. This will hopefully combat one of the most common business issues, which is the use of unpaid super contributions to support cashflow shortfalls.

This is a major issue, especially among SMEs. Having STP helps ensure employers are meeting their obligations to their employees.

However, the downside of the introduction of STP is the greater regulatory burden for SMEs. Small business owners already need to deal with many compliance issues and STP may add to this load. Hopefully, it is a short-term pain for a long-term gain.

There are concerns that many small businesses will struggle to comply to STP without help and support. Those businesses without the education, or those who are yet to digitise their processes are at risk of being penalised.

In fact, a survey run by Accountants Daily in June 2018, found that 89% of accountants from 600 accounting practices believed their clients weren’t ready for the rollout.

If you haven’t already done so, as a business owner you should speak to your payroll software provider and find out how they are complying with STP reporting. It may be through an update to existing software or an additional service.

Businesses can also check which payroll software and service provider offers STP-enabled products on the Australian Business Software Industry Association product catalogue.

The good news is that the ATO recognises that the first 12 months of STP rollout is a transition period. During this time, employers are exempt from penalties for failing to report on time. However, failure to report on time may attract a penalty in the future.

For small businesses owners, now is the ideal time to get ready. Don’t wait until the last minute.

You should start talking to your trusted advisers, accountants or bookkeepers to make sure they are reporting correctly, and their staff are trained, before it’s too late.