Single Touch Payroll (STP) is a system that works by sending tax information from your accounting software or STP-enabled payroll to the Australian Tax Office (ATO).
What kind of business requires the use of Single Touch Payroll?
STP was initially introduced in the Budget Savings (Omnibus) Act 2016. All employers with a number of equal to or greater than 20 employees were required to start reporting from July 1st, 2018.
More recently, new legislation has passed requiring small businesses with less than 20 employees from Jul 1st, 2019 to also report through STP.
How does it work?
Your STP-enabled software will create reports that get sent to the ATO. This includes information like your employees’ salaries and wages, pay as you go (PAYG) withholding, super liability information, amongst other payments.
You can also include other withholding payments of your choice in your STP reports. They are not mandatory, but STP allows you to streamline your reporting rather than spreading it out over multiple reports.
Examples of payments you can include are reportable fringe benefit amount (RFBA) or reportable superannuation contributions (RESC) for your employees.
If you do this by July 14th in the next financial year – you will not be required to submit a payment summary annual report, covering these amounts, to the Commissioner of Taxation
How can I prepare?
Employers with less than 20 employers
If you are a small business owner with less than 20 employees, there are a number of options for you to get ready and report through STP:
If you are currently using payroll software, you can also use it to report if it is STP-enabled. If not, talk to your software provider and find out what other options are available.
If you do not currently have payroll software, look for one that offers STP reporting
Hire a professional such as a BAS or tax agent to report through STP on your behalf
Employers with 1-4 employees
If you are a micro business with 4 or less employees and are not already using payroll software, there are alternative ways to report through STP:
Choose a low priced/ no cost program from the governments STP product register. Think about what product best matches your specific business needs.
You may be eligible for quarterly reporting concession. You just have to find a tax or BAS agent who is willing to report quarterly on your behalf.
What is concessional reporting and am I eligible?
There are several concessional reporting options available to help businesses transition to Single Touch Payroll. Eligibility differs for each one and depends on individual circumstances.
If you are an employer with 1-4 employees you are considered a ‘micro employer’ and have the option of reporting through your registered BAS or tax agent on a quarterly basis until June 30th, 2021.
If you choose to go with this option, you must find an agent to lodge the STP report on your behalf through an STP-enabled software.
Eligibility
To be eligible for the quarterly concession:
You must have between 1-4 employees on the day of your application
Have non-automated payroll – This includes manual payroll systems with hard copies of every record.
Process your activity statements electronically via a registered tax or BAS agent.
All amounts owed to the ATO are either subject to a payment plan or not yet due.
All lodgement requirements are either subject to deferral or not yet due.
If your employee numbers increase after having your application for the concession accepted, you will still be eligible to report quarterly until June 30th, 2021.
How does it affect closely held employees?
If you are a small business with fewer than 20 employees, you are able to report your closely held payee information quarterly. No application is required for this exemption.
Eligibility
A closely held employee is someone who is directly related to the entity that they receive payments from. These are people such as directors, shareholders, trust beneficiaries, or family members of a family business.
If your business only has closely held employees, you do not need to begin STP reporting until July 1st, 2020.
Payments included in quarterly report for closely held employees
You will be required to make a reasonable estimate of the total amount paid to your closely held employees each quarter.
This estimate amount can be calculated though:
Withdrawals taken by the employee – these do not include dividend payments or payments which reduce the total liabilities owed to the closely held employee by the business.
Vary the amount of the previous year, taking trading conditions into account, within 15 % of the overall directors or salary fees for the current financial year.
Calculate 25% of the total salary or directors’ fees from the year of the last lodged tax return of the closely held employee
Reports for employees who you report for each pay day are lodged separately to the quarterly reports for closely held employees.
If, however, you are also eligible for quarterly reporting on your non-closely held employees, you can report for all your employees in a single report.
All STP reports will also include the total amount of pay as you go (PAYG) withholding payments for the quarter and your total gross wages.
Due dates for quarterly STP reporting
If you are eligible for quarterly reporting, you will need to send your STP report once every quarter for your employees at the same time you lodge your activity statement.
If you would like to report on a more frequent basis, there are also options available such as monthly reporting.
If you’re still not sure whether you need to be using single touch payroll, reach out to an expert here and we can determine your obligation.
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