Getting Started With Single Touch Payroll Reporting

The Australian Government recently enacted legislation obliging enterprises, regardless of nature, to issue reports on the organization’s payroll processes and send them to the Australian Taxation Office (ATO). The new initiative, named Single Touch Payroll (STP), aims to increase visibility on employee data through real-time reporting per pay cycle.

What is Single Touch Payroll (STP)?

In a nutshell, the STP initiative is a compulsory shift to a new process of tax and superannuation reporting to be embedded in a business’s payroll or accounting software, with services like MYOB payroll becoming a must for businesses. ATO acts as the concerned body who will administer, monitor, and uphold the compliance of this legislation. It is the Australian Government’s digital-first strategy in automation under the payroll services. This challenges employers to arm their machinery with appropriate technology to serve employee data as needed by ATO.

On plain sight, a business will still run their payroll as normal, and the pay cycle need not be changed. The added workflow on the payroll process is the submission of reports to ATO per pay run. ATO highly encourages an STP-enabled payroll software that delivers the said report automatically, a concrete consideration before procurement.

The information provided to ATO is matched with employer and employee records to spot any discrepancies. Employee data are keyed in the ATO’s online database for record-keeping. This format allows employees to view their year-to-date tax and super information. Simply think about how Employee Self-Service (ESS) is administered by several corporations. The Australian Government sees the initiative as a tool for increased transparency and visibility on real-time data so they come pre-arranged for an employee’s disposal.

What Businesses Need STP?

With the STP rollout gaining heavy implementation to businesses with Australian payroll, it is important to gauge the impact of the said initiative based on business size. On July 1, 2019, ATO enforced large employers with 20 or more employees to switch to STP reporting. The legislation pushes compulsory transition to such ‘substantial employers.’ For employers with one to four employees, options of availing a no-cost or low-cost software solution are available.

To help with the transition, ATO opened the option of concessional reporting to eligible business organizations. The employers allowed for concessional reporting are as follows: micro employers, micro employers in agriculture, fishing, and forestry industry, micro employers managing non-for-profit associations, closely-held payees, seasonal and intermittent employers, and employers of inbound assignees.

How to Comply with STP?

Something to note before administering STP is the evaluation of ATO’s guidelines. ATO’s regulations state that salary or wages and pay as you go withholding information should be reported and available to the Commissioner in real-time whenever the pay run is processed by the employer.

Employers can send STP data on various options based on ATO’s recommendations. The three types of solutions to follow to stay compliant with STP reporting are through a direct submission from existing payroll software, through a third party sending service provider (SSP) installed in the software, or through a third party SSP unrelated to existing software.

Also, STP reporting underlines the recognition of employee-based data per report. Each report to be submitted to ATO will include minimum reporting requirements to comply with STP. A pay event (either payment date stipulated in electronic transaction or date intended to make payment into the employees’ payroll account) is reported to the ATO on or before the pay run.

The ATO reports are filled in with payroll processes, including year-to-date values of gross salary or wages, allowances, deductions, and PAYG withholding for each employee recorded in a particular pay event.

What are Exemptions in STP?

ATO is granting exemptions on reporting through STP based on financial year and particular employee or group of employees. For micro employers managing five to 19 employees, the exemption to STP reporting will only apply if conditions are met. If a business has unreliable internet access, its employers are not required to apply the STP reporting on their processes. Most certainly, businesses with poor connection will find it difficult to send reports digitally.

With the suggestion of STP-enabled software, employers are faced with an added expense to get their processes aligned with the new reporting. However, not all employers can afford third-party software or SYP-ready payroll solutions. These employers with no or low digital capacity can apply for an exemption on the STP.

Conclusion

STP is not an added complexity to the current reporting environment for payroll services, but an opportunity to align payroll functions with reporting obligations on fewer resources. The approved methods of STP reporting are poised to alleviate some admin burdens for employers such as EOYG and other summaries. In summary, STP works for the fast-moving digital convenience and reporting obligations with emphasis on data readiness and process quality.