Are you Single Touch Payroll (STP) Ready ?
From the 1st of July 2019, employers with less than 20 employees are now required to comply with STP. This extends the requirement of employers with 20 or more employees being required to report from the 1st of July 2018.
So what is STP ?
STP works by sending tax and super information from your payroll or accounting software to the ATO as you run your payroll.
You will be reporting super liability information through STP also. Super payments will still be made through super stream and the super funds will be reporting to the ATO. Everything is now connected.
Superfunds will report 10 days after receiving an employer contribution and the ATO will be updating myGov and online services daily with STP reported information. It is currently unclear how the ATO will then contact employers where information does not agree.
Payments made to contractors are not mandatory under STP.
What needs to happen ?
You have to report via STP, a pay event, on or before the date you process your payroll. The date of pay on the payslip will have the STP reporting date. If you process an adhoc payrun for adjustment purposes, report the date as the payrun date not the date being adjusted.
You must report the year-to-date values of gross salary or wages, allowances or other payments (as relevant), deductions and PAYG withholding for each employee included in that pay event.
These year-to-date amounts may be less than a previous report (for example, recovery of a current year overpayment).
These amounts can be zero, however, they cannot be negative.
Adjustments made to prior pay events can be negative as long as the year-to-date amount is not negative.
STP reporting requires the employer to report to the ATO, the following information at the time of the payroll:
gross salary or wage (including directors’ fees that are subject to PAYG withholding);
amount of PAYG withholding; and
as a minimum, the liability for superannuation guarantee (SG) or ordinary times earnings, although other superannuation amounts can also be reported through STP (the actual payment of superannuation to the fund is not reported through STP; see below).
At the end of the financail year you need to lodge a finalisation declaration. A finalisation declaration is a declaration in the approved form given to the Commissioner of Taxation by 14 July stating you have fully reported for the financial year and for each of your employees using Single Touch Payroll. You are then not obliged to give payment summaries to your employees (although you may still choose to) or a payment summary annual report to the Commissioner.
What happens if you fail to comply ?
If an employer fails to withhold or report PAYG withholding amounts though STP or activity statements, new measures contained in the Treasury Laws Amendment (Black Economy Taskforce Measures No. 2) Act 2018 (enacted on 29 November 2018) will, from 1 July 2019, deny a tax deduction to the employer for the payment made to the worker (the measures also apply in respect of contractors where no-ABN withholding applies but this is beyond the scope of STP).
Employers with closely held payees
A closely held payee means the 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.
Employers with 19 or less employees do not need to report closely held payees in 2019-20.
You will have the option to report closely held payees quarterly from 1 July 2020 - after the exemption period.
You will need to make reasonable estimates each quarter of the amounts paid to closely held payees. You can calculate these amounts using one of the following methods:
actual withdrawals (not including payments of dividends or which reduces the liabilities owed by the business entity to the closely held employee)
25% of the salary/director fees from the previous year per quarter
vary the previous years’ amount (to take into account trading conditions) within 15% of the total salary for the current financial year.
These methods are the same as the way you would calculate pay as you go (PAYG) installments.
So in summary !
From July 1 2019, every time you process payroll, you run the STP lodgement.
From the 1st of July 2020, closely held payees can report quarterly through STP. Prior to this date reporting is not reuired.
Pay Super by the 21st of the month following the quarter to ensure the funds arrive to the super fund by the 28th. Its no longer an option to miss this date. ATO default reporting will now be required.
You still need to file a finalisation declaration by the 14th of July. This replaces the need to lodge payment summary's, but this will not happen untill July 14th 2020.
Ensure your employees realise that there payslips are now via MyGov and you will no longer be providing these from July 1 2019 if you are required to start using STP.
You can only amend the most recent STP lodgement. Adjustments or corrections can be made in a later pay event or payrun. Also adjustments need to be reported through STP by June 30. and remember the year-to-date amount cannot be negative.
Process all payroll and super through your accounting software to ensure information reconciles to what the ATO can see.