In July 2019, the Australian Tax Office (ATO) has made Single Touch Payroll (STP) mandatory for small businesses.
It’s been coming for a while, but now it’s almost upon us, and it can be really easy to feel unprepared.
In a recent episode of The Bookkeeper’s Voice, I discussed Single Touch Payroll (STP), with Mary-Clare Switz & Katrina Spinazzola, and how things are changing in the bookkeeping industry.
If you’re interested in all the details (and there are a lot of details!), you can listen here >>> The Ultimate Guide to Single Touch Payroll
Most of you probably know about STP by now, but it never hurts to review the basics. Stick with me, because I have a big announcement at the end!
Single Touch Payroll (STP): The Basics
I’m sure you have heard the term STP by now, but it can still get a little unclear about exactly what this entails (and how it applies to each business!).
Single Touch Payroll (STP) requires employers to report through the new STP system. This means, every time you do a pay run, you have to send the Australian Tax Office (ATO) your STP data.
This is usually done by using compliant payroll software. This ensures that employers report employee tax and super info to the ATO every time they do payroll.
So, basically, you need to make sure that you report every payroll through STP (including all tax and super info), instead of reporting quarterly.
Obviously, if you handle a client’s payroll, then this is something you would need to implement for the business. If you don’t handle the payroll, it’s still important to be aware of it. This is because it does change a few things when it comes to the business’s paperwork.
It sounds like a lot…. Luckily, it’s pretty simple if you have the right tools and the right help…
So, now that we’ve got that out of the way, let’s dive into the details. We’ll take a look at what this means for the business owner (employer), as well as the employee!
Most of the changes are happening to the employer (and their bookkeepers!).
The BIG changes have to do with the process of reporting.
Each pay run, the wages, PAYG tax and superannuation data is sent to the ATO via the STP process.
This means that reporting is done every time you do payroll.
Simple enough…isn’t it? But what does the employer have to actually DO?
There are a few steps that need to be taken to ensure STP goes smoothly:
If these steps are done in the correct order (at the right time!), there shouldn’t be any hitches when it comes to implementation.
- Employees’ wages are recorded using the preferred payroll software
- Payslips are generated and sent to employees
- Wages are paid via internet bank transfer
- Employee receives payment for salary or wages into their bank account
- Employer ‘files’ the pay-run event information, sending to the ATO
- Employer makes “Finalisation Declaration” at the end of the financial year.
- The employer will no longer need to provide PAYG Payment Summaries to employees at the end of the financial year or lodge a PSAR with the ATO
As bookkeepers, we need to make sure that everything is correctly recorded. Without this crucial first step, the rest of the process kind of falls apart (yikes!).
It’s also really important to note that The Finalisation Declaration REPLACES the PAYG Payment Summaries and PSAR. Employees might still need to complete End of Year Payroll Reconciliations (for previous years), so it’s good to double-check!
Okay, this is actually an easy one. When it comes to the employee, things don’t really change all that much!
Basically, all of the relevant information for the employee, is stored in their MyGov account, all in one place. The employee can log into MyGov to see wages, PAYG tax and super, and then lodge their tax return at EOFY.
The employees don’t have to do much differently (when it comes to the business), but this does affect their reporting. This is why it’s important that everyone in the business is aware of the changes.
What About the ATO?
Of course, all of these legislative changes are being organised by the Australian Tax Organisation (ATO). The pay run data is matched by the ATO to the employer and employee. Then it is sent to the employee’s MyGov account, via their systems.
So… What does this mean? Basically, it means that the ATO is kept informed. They can check that everything is matching up as it should to prevent any hiccoughs.
The ATO receives the following data from employers: year-to date wage info, year-to-date PAYG Tax withheld, as well as year-to-date superannuation accrued and paid.
The ATO then uses this to match the data between the employer and employee. They pre-fill data into the employee’s tax returns, and makes for easy tax lodgement.
BAS, FBT, ETP, RESC
Phew… That’s a lot of acronyms!
Luckily, it all breaks down and makes a lot more sense. To start off: Employers still need to make sure that their business submits a BAS, when it’s that time of the year.
ETP (employment termination payments) and RESC (reportable employer super contributions) both need to be reported when you file your pay runs (every time you do payroll, when relevant).
FBT (fringe benefits tax), doesn’t need to be reported during every pay run, but it does need to be reported when STP is finalised.
One benefit to using STP, is that there is no need to produce payment summaries or annual payment summary reports. The confirmation process for STP is a lot easier (at the end of the year), and it allows you to make sure you have reported everything fully.
Over to You…
There’s SO much to cover when it comes to STP, so if you’re interested in hearing more about it, head over to our recent episode of The Bookkeeper’s Voice and have a listen! >>> The Ultimate Guide to Single Touch Payroll
I promised a big announcement at the start of this post, and I meant it. Here at The Savvy Bookkeeper, we understand that STP is a steep learning curve. That’s why we’re launching a brand-new service!
That’s right! We’re partnering with Mary-Clare Switz & Katrina Spinazzola. We are going to help you implement it in YOUR business (and your client’s businesses!).
Interested? >>> Click here to register!
Thanks for sticking around to the end…I know there was a lot to process (there’s a lot to learn about the STP, after all).