What is Single Touch Payroll?
Updated: May 28
WHAT IS SINGLE TOUCH PAYROLL?
Single Touch Payroll (STP) is a new regulation that changes when and how businesses report payroll activity to the Australian Tax Office (ATO). From 1 July 2019 all employers will need to report through STP.
Businesses used to report payroll activity to the ATO once a year. Now, they need to send a report after each pay day. And those reports must be submitted digitally, using a specific format. The information is sent to the ATO either directly from software, or through a third-party service provider.
If you are using a solution that offers STP reporting, such as payroll or accounting software, you will file your employees’ tax and super information to the ATO using the software each time you run your payroll and pay your employees.
There will also be a number of third-party service providers available for employers who do not use payroll software.
THE GOOD NEWS IS; NO MORE PAYMENT SUMMARY ANNUAL REPORTS NO MORE EMPLOYEE PAYMENT SUMMARIES, EITHER!
Because you will be updating the ATO on a pay-by-pay basis, you won’t need to prepare Payment summaries or a payment summary annual report anymore. You will just let the ATO know when you’ve made your last pay run of the financial year for your employees.
The ATO will use single touch payroll reports as the sole record of salary/wages paid, taxes collected, and superannuation contributed. Your employees will be able to see the information that would normally be on their payment summary by logging on to myGov.
YOU WILL NEED TO REPORT PAYROLL ONLINE.
There will be no more paper forms for reporting your payroll activity to the ATO. You will need to submit the information online, using a specific format known as Standard Business Reporting (SBR).
This is done through your payroll software or third-party service provider.
HOW STP WORKS.
You will run your payroll, pay your employees as normal, and give them a payslip. Your pay cycle does not need to change (you can continue to pay your employees weekly, fortnightly or monthly).
Your STP-enabled payroll software or service provider will send the ATO a report which includes the information they need from you, such as salaries and wages, pay as you go (PAYG) withholding and super information.
You will be reporting super liability information through STP for the first time. Super funds will also be reporting the ATO. They will let them know when you make the payment to your employees' chosen or default fund.
ATO systems will match the STP information to their employer and employee records.
Your employees will be able to see their year-to-date tax and super information in ATO online services, which can only be accessed through myGov. Their data is updated every time you report (each pay day for most employers).
If you make mistakes in your STP report, you can correct it in your following report. The ATO won't penalise you for making mistakes you correct.
At the end of the financial year, you'll need to finalise your STP data. This is a declaration to the Commissioner to state you have completed your reporting for the financial year.
You will no longer have to give your employees a payment summary for the information you've reported and finalised through STP. Once you finalise your data, your employees or their accountant will be able to lodge their income tax return using the STP information available on the myGov account.
From 2020 the ATO will be pre-fill activity statement labels W1 and W2 for small and medium withholders with the information you report to them through STP. If you currently lodge an activity statement you will continue to do so.
CAN I START FILING STP BEFORE IT IS MANDATORY FOR ME?
Yes you can!
STP is available on all Xero plans that include payroll. Just go to the pay runs screen and click the banner to get started.
You can also set up an account with a service provider and start to report through them.
WHAT DO I NEED TO DO?
To be ready for the switch, you will need to make sure you can submit compliant reports every payday.
If you use online payroll software, it should be able to handle the job. Just make sure it produces ATO-compliant reports.
If you use desktop payroll software, you’ll need to find a service that can upload your payroll reports, convert them into the ATO’s required format and submit them on your behalf.
If you use spreadsheets or pen and paper, you’ll need to find a service to convert the data into a compliant digital report format and submit it on your behalf.
WHAT IF I NEED HELP?
CALL JESS AT ANYTIME ASSIST ON 0431 604 609
Jess can meet with you and help you to set up Single Touch Payroll for your business. She can assist you with creating an easy procedure for each pay run so that Single Touch Payroll becomes an easy task. If you would prefer Jess will complete your payroll for you each pay period either at your place of business or remotely.