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Single Touch Payroll is here for small businesses

Monday, March 11, 2019

Legislation has now passed to make Single Touch Payroll (STP) mandatory for small businesses (4-19 employees) and micro businesses (1-4 employees) from the 1st of July 2019. Single Touch Payroll is a continuous reporting system that requires businesses to report their wages, superannuation and PAYG withholding to the ATO at the same time they prepare their wages so the frequency that you report will be based upon your current payroll cycle. Single Touch Payroll is linked to your employees My.Gov account so they are able to see their year to date wages at any time. This data will also pre-fill into the tax returns when they are prepared through my.gov. Businesses with over 20 employees have been require to do this since the 1st of July 2018 with a few exceptions.

Micro businesses

Micro businesses are those businesses that have one to four employees. The ATO are aware that not every business uses an accounting package which includes payroll functions, or even use an accounting package at all. Accounting Software providers have been working on low cost solutions for Micro Businesses at the request of the ATO. These low costs solutions must cost $10/month or less and will have the minimum functionality to allow your business to be STP compliant. Initially, micro businesses will be able to report quarterly through a BAS or tax agent however the ATO haven’t given a timeframe on how long they will allow that as an alternative option.

Small Businesses

Most small businesses with more than four employees are probably using some kind of accounting package to handle their payroll needs. However, they may have bought a product a few years ago, before the subscriptions models used by accounting software providers became common place. Most of these software providers have indicated they have no intention of making their older products single touch payroll compliant. This means for businesses using old MYOB products (v19 or earlier), they are likely going to have to upgrade into the new subscription model. Reckon Accounts users will need upgrade to Reckon Accounts 2018 and ensure you are using the updated version and have the tax table updates installed.

Many of the Single Touch Payroll solutions, especially the low or not cost solutions, are still in development with most expected to be ready by June 2019. In anticipation of delays, the ATO have already announced an extension for business with less than 20 employees until the 30th of September 2019 to be fully STP compliant.

The ATO have recently announced an extension of 12 months in the single touch payroll rules for closely held employees. Closely held employees is just ATO talk for the business owners and their family. They recognise that some business owners don’t pay themselves through a standard payroll process, some recording their wages quarterly and others annually, when they prepare their tax returns. This one year extension is to give the ATO time to come up with a better solution for STP reporting for close held employees.

When the large businesses were required to move to single touch payroll, once they got over the initial problems of setting up their systems they found that single touch payroll is a painless process and doesn’t add much time to the payroll processing at all. We recommend starting your journey to being single touch payroll compliant early, especially if it will require you to upgrade to a newer product. Now is the time to explore your options to make sure your business is ready by the 30th of September 2019.

If you would like to discuss single touch payroll or the options available for your business, please contact one of our experienced accountants who will be more than happy to assist.

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