Since that time the ATO has been working in conjunction with the software industry to ensure the transition for these business types would be as smooth and as low cost as possible. We have been proactively encouraging or facilitating our clients to transition to STP and looking for solutions to lodgement requirements under the new regime.
Whilst 1 July 2019 was the “soft” deadline for the new system, the ATO is expecting all businesses to be STP compliant by 1 October 2019.
An extension of time has been given by the ATO to allow employers to transition to the system as follows:
Employers with 5-19 employees (small employers) – Small employers must start reporting by 30 September 2019. If you won’t be ready by that time you can apply for a deferred start. Deferrals will be considered where you are using customised software requiring configuration, have complex payroll arrangements and need additional time to transition, you have entered administration or liquidation or have been impacted by a natural disaster or affected by other circumstances which are out of your control. Your Ruddicks advisor can help you through this process.
- Employers with 1-4 employees (micro employers) – Micro employers must also start reporting by 30 September 2019. There are a number of options available to help you transition to STP reporting. These include low/no cost simple solutions. These can be found here. We can assist you lodge your STP reports provided you do not have, as yet, a digital solution and you authorise us to apply for the concession on your behalf before 30 September 2019. To be eligible for this concession you must:
- be up to date with your tax payments, being they are not yet due or are subject to a payment plan; and
- all your lodgement obligations are up to date, being not yet due or subject to a deferral arrangement; and
- lodge your activity statement electronically via us (as your tax agent).
This will allow you to lodge payroll details on a quarterly basis up until 30 June 2021.
Employers with closely held payees – This is an employer who employs family members directly in their business where they might be either directors and/or shareholders of a company, beneficiaries of a trust or employed in their own right by a family business. This includes husbands, wives, sons, daughters and parents. Where there are arm’s length employees of the entity, this concession will not apply to them and the entity must report on or before the pay date for those employees. If you only employ closely held employees you will be exempt for the 2019/20 year financial year but will need to be reporting under the STP regime from 1 July 2020. In addition, you will have the option to report closely held payee information quarterly at the same time you lodge your activity statement but through an STP enabled solution.
So what are the practical implications of the introduction of STP reporting? The ATO will now have a real time record of your payroll obligations, in particular, the PAYG withholding deducted from wages and super obligations. They will be able to data match that information, particularly with superannuation funds which, from this year, are now also required to report contributions in real time.
In the past there has been a tendency for some employers to not pay, or to pay late, their obligations for superannuation. There has always been a requirement to lodge and pay superannuation obligations by no later than the 28th day of the month following the close of the quarter. For example, obligations are to be received by superannuation funds on behalf of employees for the quarter ended 30 September by no later than 28th October with appropriate documentation.
Technically, payments made after that date become subject to the superannuation guarantee charge (SGC) requirements which require the employer to lodge and pay the employees’ superannuation contributions to the ATO along with any penalties and interest. Penalties and interest apply for each employee obligation missed. However, superannuation funds have willingly accepted contributions with supporting documentation even when they should have rejected the contributions and advised the employer of their obligations under ATO legislation. Now with STP, the landscape has changed. It is fair to say that it is entirely probable that ATO audit activity in this area, after a bedding down process, will escalate. There have been too many high profile cases involving employers leaving their employees high and dry by using employee obligations to fund their own working capital requirements.
The message is clear – the ATO will become aware of employers who do not pay contributions required by law for their employees by the due dates almost immediately, and will no doubt respond with audit activity in quick succession. Such employers will no longer escape ATO scrutiny, and the penalties for non-compliance are harsh. We encourage you to consult your Ruddicks advisor should you require any assistance in meeting your superannuation and Pay As You Go Withholding (PAYGW) obligations.
We take this opportunity to remind you that Ruddicks offers clients an Audit Shield service, which covers the cost of our professional fees in the event of an audit, enquiry or investigation by the ATO, as well as various other government authorities, including the State Revenue Office and the Fair Work Ombudsman. We have recently been in touch with the insurance company underwriting the service, and they have expressed an expectation that ATO superannuation and PAYGW audits are likely to grow dramatically as a result of single touch payroll. They have confirmed that the Audit Shield product will respond to superannuation and PAYGW audits and enquiries emanating from STP data matching (with the exception of situations where no superannuation has been paid at all for employees and no efforts have been made to comply with the law whatsoever). We encourage you to contact your Ruddicks advisor to obtain more information about Audit Shield.
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The content of this newsletter is general in nature. It does not constitute specific advice and readers are encouraged to consult their Ruddicks adviser on any matters of interest. Ruddicks accepts no liability for errors or omissions, or for any loss or damage suffered as a result of any person acting without such advice. This information is current as at 25 September 2019, and was published around that time. Ruddicks particularly accepts no obligation or responsibility for updating this publication for events, including changes to the law, the Australian Taxation Office’s interpretation of the law, or Government announcements arising after that time.
Any advice provided is not ‘financial product advice’ as defined by the Corporations Act. Ruddicks is not licensed to provide financial product advice and taxation is only one of the matters that you need to consider when making a decision on a financial product. You should consider seeking advice from an Australian Financial Services licensee before making any decisions in relation to a financial product. © Ruddicks 2019