After considerable delays in the Senate, small employers now have some clarity surrounding the implementation date for Single Touch Payroll reporting (“STP”). The Treasury Laws Amendment (2017 Enterprise Incentives No. 1) Bill 2017 was passed by the Senate on Wednesday 5 December 2018 with a proposed amendment.
The Bill introduces, among other measures, legislation extending Single Touch Payroll reporting to employers with less than 20 employees. Employers with more than 20 employees have been subject to Single Touch Payroll Reporting since 1 July 2018.
The proposed amendment which relates to a part of the Bill relating to deductible gift recipients means the Bill will have to go back to the House of Representatives in its entirety before any changes can be made to the law. As Parliament has now risen for the year, the amendment to the Bill will not be considered by the House of Representatives until the February 2019 at the earliest.
Despite the fact the Bill has been referred back to the House of Representatives, employers with less than 20 employees should be taking steps to ensure they will be STP compliant in time for the start date of 1 July 2019.
Single Touch Payroll reporting changes the way employers report information to the ATO about payments made in respect of employees.
Here are the main alterations:
- Report employee’s tax and compulsory superannuation guarantee (“SGC”) to the ATO on or before each pay day. This information is sent to the ATO from the employer’s STP enabled payroll software;
- Employers will no longer need to provide employees with a PAYG Payment Summary for payments made via STP (except for payments not made through STP for example, employee share schemes);
- Employers will no longer be required to provide the ATO with a payment summary annual report for payments reported through STP;
- Employees will be able to view their year-to-date payment information via their myGov account or they are able to request a copy of the information from the ATO;
- SGC liabilities which were previously provided to employees on their payslips will now be reported via STP. The employee’s complying superannuation fund will report to the ATO once the employer has paid the compulsory SGC liability to the employee’s chosen or default fund.
Whilst many small employers will already be using STP compliant software, some smaller or micro businesses (e.g. with 1-4 employees) who have been manually processing payroll and superannuation payments will now need to find alternative options to report payroll and SGC information.
Single Touch Payroll reporting will place more of an onus on employers to ensure PAYG withholding and SGC obligations are paid on time, as same day reporting, along with data matching with superannuation funds will identify recalcitrant employers not meeting their reporting or withholding obligations on a real-time basis. The expansion of the powers of the Commissioner of Taxation to recover superannuation and PAYG withholding, along with the introduction of a criminal penalty for not meeting certain obligations, comes as a timely reminder to small employers to get their house in order.
Change does come with challenges and sadly, there may be an additional cost for some employers.
According to some media reports, Chris Jordan, the Commissioner for Taxation has said
"Micro-businesses may be eligible to report payroll and SGC obligations quarterly via their BAS or tax agent. "
However, this has not been confirmed and is not consistent with the new law. Using a BAS or tax agent to meet STP reporting requirements quarterly (if available) may add more cost to small business taxpayers than seeking to use one of the low cost STP solutions also being put forward by the ATO.
We recommend small employers impacted by the change in legislation take the following steps in the short 7 month lead up to the start date for Single Touch Payroll Reporting:
- Review current accounting and payroll systems and consider alternatives, such as;
- Subscribing to a low-cost online cloud-based accounting program (e.g. Xero, MYOB etc).
- Consider outsourcing accounting and/or payroll functions to a suitably qualified BAS agent or tax agent.
- For micro employers, consider one of the low cost STP solutions detailed on the ATO website (click here).
- Review current practices to ensure compulsory SGC payments are made in time (keeping in mind the payments need to be received by the employee’s chosen or default fund by the due date for payment)
- Discuss the changes with your employees. Let them know they will no longer receive paper copy pay slips, they will instead be able to access online information about their payments via their myGov account (or they can request a copy from the ATO).
The hidden cost for employees
Word of warning for employees who activate an account with the ATO via their myGov account.
If the employee uses a registered tax agent to prepare their income tax return, any correspondence from the ATO will be sent directly to the individual’s inbox with their myGov account. This includes Notices of Assessment, overdue notices, payment demands etc. The employee’s tax agent will not receive a copy of the correspondence or be notified of its issue by the ATO. Employees with a myGov account are encouraged to check their ATO account regularly not only to keep track of payroll information but also to ensure they receive ATO correspondence on a timely basis.
Employees who do not have a myGov account will be able to request the information from a registered tax agent, however, this no doubt will come at a cost.
Whilst the extension of STP reporting may provide some short-term challenges for some smaller employees, overall it is a good thing and will help ensure employers meet their employee obligations on a timely basis.
Employers impacted by the extension of Single Touch Payroll Reporting are encouraged to talk to their accounting and tax advisers to ensure they are ready to meet their STP reporting obligations from 1 July 2019.
Click here to contact your local RSM office.