New legislation means business owners will soon have to change the way they report payroll data to the tax office.
Single Touch Payroll, also called STP or ‘one touch payroll’, is an initiative from the Australian Tax Office to encourage frequent salary reporting. This means business owners are required to report salaries and wages, PAYG withholdings, and superannuation, every time they pay their employees. This isn’t just for big corporations – as of July 1, 2019, it applies to small businesses too.
Single Touch Payroll became mandatory for employers with 20 or more employees on July 1, 2018. But now all Australian small business owners are required to report their payroll information, regardless of the number of staff they have.
Put simply, this means the information from each pay run must be sent to the ATO via their Single Touch Payroll platform. So rather than reporting to the ATO at the end of the financial year, it is now done on a weekly, fortnightly or monthly basis – whenever you pay your employees.
For Australia’s 400,000 micro businesses that employ four or fewer people, it adds another level of administration to what might already be a laborious task. According to the ATO, 90,000 micro-businesses use no software at all.
For employers who do not use payroll software, the ATO has teamed up with the payroll software community to offer a range of software solutions for a cost of $10 or less per month. The aim is to make STP compliance affordable, even for small businesses. The solutions must only a take few minutes to complete each pay period and must not require the employer to maintain the software. The current list of low-cost STP service providers is available on the ATO website.
For those managing their businesses manually, this could be the time to switch to a cloud-based solution for managing administrative tasks. As government agencies, businesses and employees become more digitally connected, it seems cloud-based management will soon be unavoidable.
For those already using accounting software, such as Xero, MYOB, or QuickBooks, these platforms will be offering STP processing as an additional feature. Just a few extra clicks and the data will be fired off to the ATO. Of course, in many cases, the additional feature will come at a cost of a few extra dollars a month.
However, many small businesses will have closely held payees; family members of a family-owned business, directors or shareholders of a company, and trustees or beneficiaries of a trust. Closely held payees do not have be reported in the 2019-20 financial year, but have the option to be reported from July 1, 2020.
More information about Single Touch Payroll can be found on the ATO website.
