The deadline is approaching for the new Single Touch Payroll system and small businesses must be prepared, says Alex King
Small businesses – those with fewer than 20 employees – will be required to use Single Touch Payroll (STP) from 1 July 2019.
STP requires businesses to report employees’ salaries and wages, allowances, deductions, PAYG Withholding and superannuation electronically and in real-time to the Australian Taxation Office (ATO).
The legislation has been in place for larger businesses with 20 or more employees since 1 July 2018.
What does this mean for Small employers?
Small employers need to check that their current payroll or accounting software is STP-enabled to allow the automatic transfer of payroll data to the ATO. Most accounting software providers are already STP compliant.
If an employer is already utilising payroll software that is STP compliant, we recommend they perform a risk review of all the information and settings (including tax free thresholds, HELP, salary sacrifice, superannuation) to ensure that the data sent to the ATO is accurate.
A range of no-cost and low-cost STP solutions have been developed for micro-employers (those with one to four employees) who do not currently have STP-ready software. These STP solutions will cost no more than $10 per month and will not require the employer to maintain the software.
Employers reporting under STP are no longer required to provide year-end payment summaries to employees. Employees will have to access their myGov account to see their year-to-date tax and super information online. We recommend employers advise their employees to open a myGov account, if they have not already done so.
Are there exemptions or concessions?
The move to real-time digital reporting may be a significant change for small businesses. The ATO has acknowledged that there will be circumstances where small employers need more time to implement STP or lodge reports.
As such, the extension of STP to small employers will be gradual and not all small employers are required to start reporting from 1 July 2019.
Small employers can start reporting any time from the 1 July start date to 30 September 2019. The ATO will also allow micro employers to report their STP information quarterly through their registered tax agent, rather than each time they run their payroll, up until 30 June 2020.
The ATO has advised it will grant deferrals to any small employer who requests additional time to start STP reporting, and exemptions from STP reporting will be provided for employers experiencing hardship, or in areas with intermittent or no internet connection.
Finally, flexible reporting options are available to small employers with closely held payees (that is, non-arm’s length employees including any family members, directors or shareholders).
Small employers will be exempt from reporting payments to closely held payees for the year ended 30 June 2020 (however, they must still report payments to arm’s length employees through STP). From 1 July 2020, small employers can report closely held payees quarterly
Alex King is director, Tax Consulting at HLB Mann Judd Sydney
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