Jo VoightBookkeeper and BAS Agent
Single Touch Payroll for all Employers
Single Touch Payroll is a Government initiated change in reporting obligations for all employers. Initially, large employers were obliged to report from 1 July 2018. Now, ALL employers must enter into the reporting system from 1 July 2019.
Who is it for?
- Employers with more than 20 employees should already be in the system and reporting each pay run.
- Employers with less than 20 employees must enter STP as of 1 July 2019, as legislation has now been passed.
- Micro employers with four or less employees will have additional (easier) options for reporting.
- Small and micro employers have until 30 September to enter the system.
What is it?
Employers must submit payroll and superannuation data to the ATO each time employees are paid. The ATO refers to this as a pay event. Payroll data must be submitted to the ATO by a Standard Business Reporting solution or from STP compliant software.
How does it work?
Xero offers STP reporting directly from the software. Once the payroll settings have been updated for STP, there is a simple extra step to process your Xero pay run.
Each time pay event information is submitted to the ATO, the totals for the year-to-date are submitted.
Micro employers (fewer than 4 employees) are able to submit the pay event information each quarter rather than each pay run.
The ATO will gain greater visibility of all employers, enabling earlier activity to ensure the employer is reporting and paying their Pay As You Go Withholding tax (PAYGW) and their Superannuation Guarantee Contribution. PAYGW is the income tax employers must withhold on behalf of their employees and then pay to the ATO monthly or quarterly on the Business Activity Statement (BAS).
Currently, some employers misreport their wages and PAYGW on the BAS to reduce the amount payable. Although the ATO does track down these employers and pursue them, typically it can be a long time (perhaps years) before they are caught. With STP, employers may still misreport wages and PAYGW but they will be caught much sooner because of the data matching.
Unpaid superannuation continues to be a major issue, with some employers getting away with this for years. With STP, superannuation funds must report to the ATO on payments received. This will allow the ATO to match data and pursue employers who are not paying their obligations promptly.
It is also aimed at streamlining the individual tax return process, as the ATO will have all employee data pre-populated in the tax return. As part of this process, the ATO will match the data submitted by the employer to the data reported by the employee to minimise employees underreporting earnings.
What does it mean for employees?
This does not change payments, entitlements or pay slips for employees.
Employees will be able to see all year-to-date payroll information online through their individual myGov account.
It is no longer required to provide payment summaries to employees, as this information will also be available in the myGov account. Once the employer has finalised the payroll year, the employee will see an income statement in the myGov account listed as ‘tax ready’.
Individual tax returns will be pre-populated with payroll data lodged through STP.
Although it is not obligatory for an individual to have a myGov account, it seems that if an employee wishes to access all their payroll information online, they must have a myGov account. This will certainly be the easiest option for both employers and employees. However, employees who do not wish to open a myGov account can ask their employer for the payment summary for their tax return.
Single Touch Payroll in Xero
Xero has various business subscriptions available for employers. There is also a solution for micro employers who do not need the full business accounting subscription. The Payroll Only plan for $10 per month can be used for up to 4 employees.
Payroll processing in Xero will simply involve an extra step. Once the pay run is posted, the pay event is then filed with the ATO directly from Xero.
Check my Xero Advisor profile here.
Contact me for a complimentary 15 minute chat on how Xero can make your business systems, payroll and bookkeeping more efficient and enjoyable.
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