From 1 July 2018, Australian companies with 20 or more employees (known as substantial employers) will have to begin meet a new payroll compliance requirement called the Single Touch Payroll (SPT).
The Single Touch Payroll has been introduced by the Australian Taxation Office to streamline payrolls reporting in businesses considered substantial employers. Businesses with 19 or less employees (non substantial employers) will begin complying with the payrolls reporting requirement from 1 July 2019 subject to new legislation being passed by the Australian parliament.
What is Single Touch Payroll?
The Single Touch Payroll or STP is a new Australian government initiative that aims to simplify payroll reporting and align it with your payroll processing. Under the STP, employers will be required to report all the payments when employees are paid. This data will include the employees’ salaries, superannuation payments, wages (where applicable) and the Pay-As-You-Go (PAYG) tax that is withheld. Employers will essentially be reporting payroll payments in real time every time they process these payments.
The STP will not only provide greater transparency in the payroll processing but it will also connect the businesses to the Australian Taxation Office using existing payroll software. The current payroll software tools being used by millions of businesses in Australia will have to meet the STP compliance requirements. However, the onus is on the client to comply with the new rules so if your payroll software will not be supporting STP by 1 July 2018, you will have to migrate to a Payroll software that does.
Are You a Substantial Employer?
Under the single touch payroll reporting regime, employers will be broadly classified into two categories:-
- Substantial employers: These are employers with 20 or more employees. They must start complying with the new reporting requirements on 1 July 2018.
- Non-substantial employers: These are employers with 19 or less employees. They will begin compliance on 1 July 2019 pending new parliament legislation.
Determine if you are a substantial employer
Do a simple headcount of the number of employees in your payroll as from 1 April 2018 to determine if you are a substantial employer. You should include the following employees in your headcount:-
- Full-time employees in your payroll
- Part-time employees in your payroll
- Seasonal employees and casual workers who are on your payroll as from 1st April 2018 and who had worked at any time in the month of March 2018.
- Any of your employees that are based overseas
- Any of your employees that are on leave or absent (whether paid or unpaid)
Employees not to include in your headcount:-
- Independent contractors hired by your business.
- Company directors
- Staff forwarded to your business by a third party labour hire company
- Casual workers who didn’t work in the month of March
- Employees who stopped working in your company before 1 April 2018.
Getting Ready for the Single Touch Payroll Implementation
There are less than three months left before the rollout of the Single Touch Payroll so if you are a substantial employer and have not yet prepared your business for the transition, this is the right time to get on a crash program of implementation in order to meet the compliance requirements by July 2018.
Your implementation checklist for the Single Touch Payroll system should include the following:-
- Engage your software payroll provider: As already stated, the obligation is on the employer and not the payroll software provider to submit the payroll information to ATO. You therefore need to engage your software provider and determine if they have already integrated support for Single Touch Payroll reporting. The business or their tax agent will subsequently have to provide an authorization in the software for the reporting of the required information to ATO on every pay day. Many software providers are currently on a crash program to implement the STP so you need to get in touch with them to determine if the system will be ready just in time for the 1 July 2018 reporting date for substantial businesses.
- Keep your payroll system up to date: How up to date is your payroll system? This is the time to update it before you begin sending real-time reporting to ATO after every payroll processing event. Start by reviewing your payroll system in order to ascertain that the superannuation and the PAYG withholding configurations are in order. Review the wage component in your payroll and make sure that it aligns with the ATO PAYG Withholding and Super Guarantee requirements. Finally, make sure that all the payroll transactions done outside the system such as backpay and termination payments are aligned with the payroll system.
- Consider doing some payroll onboarding processes: There are pre-existing payroll processes that may need to be readjusted in order to work seamlessly in the Single Touch Payroll environment. You can discuss these with your payroll software provider.
The Single Touch Payroll implementation is going to have serious implications. It will give the ATO real-time payroll information access that will enable the authority to perform more scrutiny and target employers that are not compliant. In the coming months and years, employers can expect an ATO audit blitz following the information opportunity opened by the STP.