Wondering what Single Touch Payroll (STP) is and how will it affect you as an employer? Here is our guide on all things STP.
What is Single Touch Payroll (STP)?
Single Touch payroll or STP is an ATO initiative to report salaries and wages, PAYG and super each time a payslip is generated.
How is this different from what currently happens? Why should business owners care about STP?
The initiative is general to digitalize the payroll system and streamlining compliance. At the moment, not everyone has their payroll generated by accounting software.
There are businesses who have continued to use the old carbon paper group/ payment summaries at the end of the year and sometimes, they do not match what has been physically paid out.
So instead of finalizing your payroll at the end of the year when your annual Payment summary and group certificates and sent to the ATO, a running balance is sent to the ATO from each pay run that is generated.
Who will STP impact the most?
Businesses who are already using cloud accounting software like Xero to process payroll won’t be significantly impacted. The only steps required here are to connect Xero to the ATO for Single Touch Payroll (instructions in the show notes)
This is going to have the biggest impact on business owners who are preparing payroll and payslips manually. They need to move to a digital system.
How has ATO payroll legislation recently changed?
As of 1st July 2018, employers with 20 or more employees were required to digitally report payroll details to the ATO.
As of 1st January 2019, the legislation was altered to all employers in Australia to adopt a compliant payroll solution which is often software based now and this takes effect as of 1st July 2019.
The attitude of the ATO is this to be a gradual transition and they are providing flexible options.
However, this also doesn’t mean that you are never going to have to do it, because they are making this a mandate eventually.
Notes from the ATO on STP implementation
- We will offer micro employers (1 to 4 employees) help to transition to STP and a number of alternative options – such as allowing those who rely on a registered tax or BAS agent to report quarterly for the first two years, rather than each time payroll are run.
- Small employers can start reporting any time from the 1 July start date to 30 September 2019. We will grant deferrals to any small employer who requests additional time to start STP reporting.
- There will be no penalties for mistakes, missed or late reports for the first year.
- We will provide exemptions from STP reporting for employers experiencing hardship, or in areas with intermittent or no internet connection.
How can businesses become STP ready?
If you are currently on a standard subscription with Xero. You already access to payroll module for 2 employees excluding automatic superannuation. Which means, you report your super outside of Xero usually using the ATO super clearing house option. As this is free.
Premium 5 and up subscriptions have payroll module and automatic superannuation included, therefore details within payroll need to be checked.
For the individuals who are too small or don’t need a standard subscription which is $50 per month. Xero has recently released a payroll only subscription for $10 per month for 1-4 employees, this does not include automatic superannuation
Who should opt into STP – the business owner, accountant or bookkeeper?
Whoever is doing the payroll, I would suggest they should be opting into STP. So if you are filing your own pay runs, then you should opt in.
Or if you accountant or bookkeeper is processing payroll, they should be opting in on behalf of the business.
Do I still need to submit a BAS?
Yes. Single Touch Payroll is completely separate to GST & PAYG lodgement. Each month or quarter your BAS or IAS is prepared and lodged to the ATO.
Data matching is used by the ATO, and therefore what is recorded in your BAS’s should match what is recorded to the ATO through the STP system.
Will I need to provide Payment Summaries to Employees at the end of the year?
Payment summaries won’t need to be sent to employees anymore, so employers won’t be required to produce them. The ATO will use single touch payroll reports as the sole record of salary/wages paid, taxes collected, and superannuation contributed.
Employees will be able to access these details by logging into My Gov Payment Summary Annual Report
Because you’ll be updating the ATO on a pay-by-pay basis, you won’t need to prepare a payment summary annual report anymore. You’ll just let the ATO know when you’ve made your last pay run of the financial year for your employees.
What information is sent with STP?
The STP system is very basic regarding reporting. Net payment, tax and super is the information that is forwarded to the ATO. Which include payments for ordinary earnings, directors and parental leave.
Payments like superannuation lump sums, compensation payments or employee share schemes are not included.
The ATO does have a list of earnings are that mandatory, voluntary and not reportable.
What happens if I make a mistake with an STP submission?
There are a few options to correct any errors.
- You can revert the pay run, make the adjustments and then refile – especially if you haven’t filed any automatic superannuation. If you have filed automatic superannuation, then this locks the pay run and you’ll need to look at the next option
- Complete an unscheduled pay run
- Fix the mistake in time for your next pay run.
What can you do to prepare for STP?
To get prepared for STP, I recommend looking at digital payroll solution, as mentioned before. Within the Xero subscription or a stand-alone Xero payroll option.
A Bean Ninjas Xero health check (for existing Xero users) or Xero setup (for new Xero users) can prepare you for STP. We’ll check the data or set up the payroll for you in time to report for STP, and we’ll include a training session with one of our bookkeepers too.
Where can you get more info on Single Touch Payroll?
- Xero is currently running Single Touch payroll webinars at the moment. You can find these on Xero’s STP website.
- ATO have webinars and helpful links you can refer to also.
- Listen to Busting common myths surrounding STP on the Accountants Daily Insider podcast
When does STP come into effect? And when would be the best time to prepare for STP?
STP comes into effect on the 1st of July 2019, so best to prepare during your taxation planning in May and June.
Want help to prepare for STP?
A Bean Ninjas Xero health check (for existing Xero users) or Xero setup (for new Xero users) can prepare you for STP. We’ll check the data or set up the payroll for you in time to report for STP, and we’ll include a training session with one of our bookkeepers too.
