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Many clients will be aware that the ATO has been moving its activity to data matching and to be able to match up information from different sources to enable them to narrow down any missed revenue from a tax perspective.

The ATO started this process over 12 months ago, when it introduced Single Touch Payroll (STP) for any employer with more than 20 staff. Legislation has been enacted which will require all employers to begin using STP reporting from 1 July 2019.

The ATO is implementing a new system to streamline and replace reporting for:

  1. Annual PAYG Payment Summaries for Staff
  2. Quarterly Superannuation Reporting

We have summarised the changes as per the attached table, to simplify for clients what this all means. Essentially, you will have to ensure that wages and super are complied with to the best of your ability and on time:

  1. When superannuation should be paid (from your payroll system); and
  2. When superannuation is received by superannuation funds, as it will match data with the Tax File Number of each staff member, and then to their nominated fund.

The ATO are using this to assist in managing with compliance of the superannuation guarantee, and will continue to do so.

The new system has the potential to change how employees are engaged as well, as Tax File Number Declarations and Superannuation Nomination forms are able to be lodged online, and they will link between the employee’s MyGov account with the Australian Government, and the employer’s payroll system.

There are different ways that this affects different clients, and different businesses, which we summarise as follows:

Employers with 20+ employees (large employers)

STP became mandatory on 1 July 2018 for large employers. If you have 20 or more employees, you should already be reporting through STP, or at least have an agreed deferral in place if you couldn’t meet the initial date.

If you have more than 20 employees and do not have your STP activated, please contact us and we can review your current accounting mechanisms to ensure ongoing compliance.

Employers with 5-19 employees (small employers)

Small employers must start STP reporting any time from 1 July – 30 September 2019. If you use payroll software which offers STP, you can update your product and start reporting any time. Your software provider will be able to supply you with information on how to update your software to a complying version. If you won’t be ready to start reporting before 30 September 2019, you will need to apply for a deferral. Contact us and we will send you the forms and we can also assist with how to apply with the ATO for opting-in early.

Employers with 1-4 employees (micro employers)

If you have four or less employees you must start STP reporting any time from 1 July – 30 September 2019, however you will have two options.

Option 1: Use a compliant payroll software. It is our strong recommendation that you upgrade or subscribe to STP compliant online accounting software, which will have the added benefit of streamlining your bookkeeping requirements.

If you don’t currently use compliant payroll software, the ATO has compiled a list of software providers who have produced no-cost and low-cost STP solutions – including simple payroll software, mobile phone apps and portals. We can provide you with some of these options, as we are qualified advisors and partners for Xero, MYOB and Quickbooks (Intuit).

Option 2: To engage AAG to report your STP data to the ATO on a monthly or quarterly basis. This service will be an additional charge to you and is only available until 30 June 2021, after which date you must use compliant payroll software.

Employers with ‘closely held payees’

If you are an employer with ‘closely held payees’, there are flexible reporting options available to you. A ‘closely held payee’ is directly related to the entity from which they receive payments, for example:

  • Family members of a family-owned business
  • Directors or shareholders of a company
  • Trustees or beneficiaries of a trust

You will receive a separate email from us by 31 May 2019 advising whether you are registered with the ATO as an employer with ‘closely held payees’. If you do not receive an email from us by 31 May 2019 and you believe that you are an employer with ‘closely held payees’, please contact us.

Even though the requirement to use STP is delayed for employers with ‘closely held payees’, until 1 July 2020, it is advised that early adoption of STP should commence.

If you haven’t started using STP yet, you will need to do the following before 1 July 2019:

  • Update your payroll system so that it can complete STP requirements. We are partners with a number of software providers, including Xero, MYOB and Quickbooks, so can assist with special pricing and offers that we have received from those different software providers; or
  • Apply to be a ‘closely held employer’ with the ATO; or
  • Apply for a deferral; or
  • Advise us and we will assist you to complete these payroll reporting requirements for you.

If you are still using a manual system to pay your staff, you will need to change soon.

Summary of the new regime

Employers generally are currently required to withhold tax from an employee’s salary and wages at the time they pay the salary. The employer then lodges an activity statement (BAS or IAS) at a relevant time (monthly or quarterly) to pay the ATO the tax withheld. At the end of the year, all the gross salary and wage amounts paid and tax withheld is provided to the employee in a PAYG payment summary. A summarised report is also sent from the employer to the ATO. From there, the ATO has the task of ensuring all employees were adequately paid, amounts were correctly withheld and the employer met their PAYG obligations.

Single touch payroll – new and current requirements compared
STP requirements from 1 July 2018 Current law
Reporting amounts paid and withheld Reporting amounts paid and withheld

Substantial entities (20 or more employees) are required to report the following information to the ATO:

  • Withholding amounts and associated withholding payments, on or before the day by which the amount is required to be withheld
  • Salary or wages and ordinary time earnings information on or before the day on which the amount is paid, and
  • Superannuation contribution information on or before the day on which the contribution is paid.

Employers that report these obligations (including those that voluntarily report) will not need to comply with a number of other reporting obligations under the existing law.

For the first 12 months, reporting entities will not be subject to administrative penalties, unless first notified by the ATO.

Employers generally are required to withhold amounts from an employee’s salary at the time they pay the salary. At a later date, they are required to notify the ATO of the amount withheld, remit these amounts to the ATO, provide each employee with an annual payment summary and provide an annual report to the ATO.

Employers generally have an obligation under SISA Pt 3B and the SIS Regulations to report, consistently with certain data standards, superannuation contribution information to superannuation funds on the same day as the employer makes a contribution to the fund. Employers do not generally have an equivalent reporting obligation to provide employee-level superannuation contribution information to the ATO.

Employers must lodge SG statements with the ATO if they have an SG shortfall for a quarter or if required to do so by the ATO under the SGAA.

Choice of fund Choice of fund

An employee may make a valid choice of superannuation fund by providing the relevant information to the ATO.

In this situation, the ATO may disclose an employee’s TFN and protected information to their employer.

In order to make a valid choice of superannuation fund, an employee must provide their employer with written notice of that choice.

Under STP, the employer will send a report to the ATO (via Standard Business Reporting (SBR)) every pay cycle that details:

  • Each employee’s name and tax file number (TFN)
  • Gross amount paid
  • Tax withheld on the gross
  • Ordinary time earnings for the period, and
  • Any superannuation guarantee obligations.

Notable changes under STP

An employer will no longer have to declare gross wages or PAYG withholding information in their BAS. The amounts relating to the employer’s month/quarter will be pre-filled when using the Business or Tax Agent’s Portal.

It is understood that under STP an employer will no longer have to provide an employee with a PAYG payment summary. The employee will be able to review their gross payments and tax withheld via the myGov website. Other areas of the payment summary, namely Reportable Employer Superannuation Contributions and Reportable Fringe Benefits will be pre-filled. It is the intention of the STP regime (as stated in the Bill’s explanatory memorandum) that the employer will still report an annual statement with these figures as part of year-end reporting.

Even though reporting of PAYG withholding and superannuation payable to the ATO will occur every pay cycle, the due dates for payments on each liability will remain the same. It is understood that the ATO will allow an employer to pay these amounts early, however this may result in cash flow disadvantages. Also, it is not known how the superannuation liability will be recognised as it currently does not appear in the ATO Running Balance Account.

New employees will have the option to complete TFN declarations and Super Choice declarations online. This information will then be provided to the employer via STP software.

Implementing Single Touch Payroll

Early implementation of the STP regime can provide your business with efficiencies for reporting tax and superannuation information to the ATO.

From 1 July 2018, you will be required to implement a payroll system that reports directly to the ATO with every pay cycle.

This payroll system must be SBR-enabled, so that you can report to the ATO each pay cycle the following items:

  • Each employee’s name and tax file number (TFN)
  • Gross amount paid
  • Tax withheld on the gross
  • Ordinary time earnings for the period, and
  • Any superannuation guarantee obligations.

Note: The system will be designed so that the employee’s tax file number will be hidden from your payroll department staff for security purposes.

The ATO will then report to you each month or quarter the correct amount of PAYG tax withheld to pay in your activity statement. Also, each quarter there will be information available regarding your superannuation obligations to either pay the ATO clearing house or your independent provider.

As part of the new regime, the reports and liabilities owing will be available to you in real time. This means that, if you wish, you will be allowed to make payments towards PAYG tax withheld and superannuation contributions in your pay cycle before the legislated due date.

If your system is already automated with reports that can provide the information listed above for every pay cycle, the system may just need an update to become SBR-enabled.

However, if your system is still manual it is now time to discuss and review your internal processes. The STP regime is mandatory for employers of more than 20 staff from 1 July 2018, and will most probably be mandatory for all employers by 1 July 2019.

Our advice is to become STP ready to avoid any fines or penalties in the future from the ATO. We are here to help you through the process if you need it. Please do not hesitate to contact our office for support.

Important information and disclaimer

This publication has been prepared by AustAsia Group, including AustAsia Accounting Services Pty Ltd (Registered Tax Agent No 7587 3005).

AustAsia Accounting Services Pty Ltd – Liability limited by a scheme approved under Professional Standards Legislation.

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Accordingly, reliance should not be placed on the information contained in this document as the basis for making any financial investment, insurance or other decision. Please seek personal advice prior to acting on this information.

Information in this publication is accurate as at the date of writing, 2 May 2019. Some of the information may have been provided to us by third parties. Whilst it is believed the information is accurate and reliable, the accuracy of that information is not guaranteed in any way.

Opinions constitute our judgement at the time of issue and are subject to change. Neither the Licensee nor any member of AustAsia Group, nor their employees or directors give any warranty of accuracy, nor accept any responsibility, for any errors or omissions in this document.

Any general tax information provided in this publication is intended as a guide only and is based on our general understanding of taxation laws. It is not intended to be a substitute for specialised taxation advice or an assessment of your liabilities, obligations or claim entitlements that arise, or could arise, under taxation law, and we recommend you consult with a registered tax agent.

AAG AustAsia

AAG AustAsia

AAG is a family-owned group providing Tax planning, management accounting, wealth management, and more. Established in 1979, AAG acts entirely in their clients' best interest by providing financial expertise and upholds a reputation of nurturing long-lasting relationships with clients to assist them with all their personal and business financial issues.