Get ready for Single Touch Payroll - count your employees as at 1 April!
STP is mandatory from 1 July 2018 for employers with 20 or more employees (called “substantial employers”) and, subject to legislation being passed in Parliament, it will be expanded to include employers with 19 or fewer employees from 1 July 2019. However, these smaller employers can voluntarily start reporting under STP earlier.
In order to determine whether your STP commencement date is 1 July 2018 or 1 July 2019, you will need to count the employees on your payroll as at 1 April 2018. You do not need to submit your headcount information to the ATO. Information on how the employee count should be performed to comply with the ATO requirements and further details about STP are provided below.
How to count your employees
- Count each employee, not the full time equivalent (FTE).
- The headcount can be done after 1 April, but you need to count the employees who were on your payroll as at 1 April 2018.
- You do not need to count any new employees who started after 1 April.
- Once you become a substantial employer (defined as having 20 or more employees) you will need to continue reporting through STP even if your employee numbers drop to 19 or less – unless you apply for and are granted an exemption by the ATO.
- You don't need to send the ATO your headcount information, this is merely so you know if you need to start STP reporting from 1 July 2018.
- If you are part of a company group, you must include the total number of employees employed by all member companies of the wholly-owned group.
Include in headcount
- full-time employees
- part-time employees
- casual employees who were on your payroll as at 1 April and worked any time during March
- employees based overseas
- any employee absent or on leave (paid or unpaid)
- seasonal employees (staff who are engaged short term to meet a regular peak workload, for example, harvest workers).
Don't include in headcount
- any employees who ceased work before 1 April
- casual employees who did not work in March (including seasonal employees)
- independent contractors
- staff provided by a third-party labour hire organisation
- company directors, office holders and religious practitioners (if they are not receiving wages - see note below).
IMPORTANT! Directors, office holders and religious practitioners are not included in the headcount if they are not receiving salary and wages. If directors and officeholders are on the payroll and receiving wages subject to PAYG Withholding, then they should be included in the headcount. When you start reporting through STP you will need to report their payment information. This is because the payments are subject to PAYG Withholding and are currently reported in the Individual non-business payment summary.
How can I make sure I am ready for STP?
- Do your employee headcount as at 1 April 2018 and determine your STP commencement date.
- Check whether your accounting software provider is ready for STP or whether they are working on an STP solution; update your accounting software if necessary to be able to use STP functionality.
- If you are doing your payroll manually (e.g. on paper or a spreadsheet), you may need to move to a software platform – see further details below. Please speak to your Ruddicks adviser if you are unsure how to proceed.
- Check and update your employees’ details in your payroll software where necessary to make sure their details are correct and up to date.
- Keep an eye out for communication from your software provider in relation to their STP-readiness.
I have 20 or more employees as at 1 April 2018 – what’s my next step?
You will need to ensure that you have implemented an STP-compliant payroll software solution by 1 July 2018. At the moment, the major accounting software providers such as Xero and MYOB are still in the process of developing STP-compliant functionality for their software, however they expect to be ready by 1 July 2018. We anticipate that software providers will communicate with their customers closer to 1 July 2018 in relation to their readiness.
UPDATE 12/04/2018: MYOB has indicated that not all their products will be STP-enabled. You may be required to upgrade your MYOB software in order to have access to STP functionality. Please contact us to discuss your particular situation in more detail.
Can I get a deferral for STP commencement?
The ATO have stated that payroll software providers who are not able to complete the transition to STP by 1 July 2018 will be able to obtain deferrals on a case by case basis, and therefore their customers will be able to rely on these ATO-granted deferrals. Please note that if you are seeking to rely on such a deferral, you will need to obtain from your software provider their Deferral Reference Number (DRN) for your records.
Individual employers may also be able to obtain a deferral by applying to the ATO. You will need to provide evidence of extenuating circumstances to obtain a deferral. An online deferral request form will be available soon on the ATO website.
I am using a manual payroll system, how can I comply with STP?
In the event that you are a substantial employer with 20 or more employees and do not currently use payroll software, you will need to take action by 1 July 2018 in order to be able to comply with STP. This may mean upgrading your existing accounting software to include payroll functionality, or setting up accounting software and importing your manual records into it.
The ATO is working on an alternative solution for smaller employers with fewer than 20 employees who use do not use payroll software. This solution should be released by the end of this calendar year. If you are in this category, you can choose to adopt accounting software with payroll functionality any time up to 1 July 2019, or you can wait to see what alternative the ATO will come up with later this year.
Are there exemptions from STP?
There are a couple of scenarios where the ATO may grant exemptions from STP reporting.
The first category is for employers with seasonal workers. The ATO will publish a class ruling providing employers with a list of criteria they will need to meet in order to be able to rely on the STP exemption provided by the ruling. Employers will need to self-assess their eligibility based on the criteria in the ruling and document their eligibility for their records. If the criteria are satisfied, the employer can then exempt themselves from STP reporting without the need to apply to the ATO.
The second category is for employers with Internet accessibility issues. Exemptions for these employers will be granted on a case by case basis, depending on the extent of connectivity problems. If you have little or no connection, you are more likely to obtain a full exemption, whereas employers who experience intermittent connectivity problems may be able to obtain a concession for STP lodgement (such as a 2-3 day deferral for each reporting period). You will need to apply to the ATO for exemptions in this category.
Does STP change payment due dates and frequency?
No. STP is a change to reporting only, payment due dates for PAYG Withholding and superannuation guarantee remain unchanged. Whilst initially the intention was to make payment due dates align with employer’s pay cycle, this plan was scrapped.
Does STP replace SuperStream reporting?
No, SuperStream reporting of superannuation contributions will continue unchanged. SuperStream reports contribution details to recipient super funds, whereas STP is a new reporting initiative between employers and the ATO.
How often do I have to report?
STP reporting will occur on or before every pay day. You do not need to adjust your current pay period to comply with STP. It’s business as usual, but now with reporting to the ATO via your accounting software every time you process a pay run.
What exactly do I have to report?
The following information must be reported on or before the pay day, on a year to date (YTD) basis:
- payment information, including salary or wages, allowances, deductions, etc.
- withholding amounts
- superannuation liability information or ordinary times earnings (OTE).
Additionally, you may choose to report via STP information such as reportable employer superannuation contributions (RESC) and reportable fringe benefit amounts (RFBA) for your employees.
Further information is available on the ATO website.
How will the reported information be used by the ATO?
- Reported information will be fed into individuals’ MyGov accounts and eventually will pre-fill wages details in the MyTax tax returns. This means that employers who are fully reporting via STP will no longer need to provide end of year PAYG Payment Summaries (but they can choose to continue doing so if they wish, as long as their software provider retains this option). However, employers will still need to provide payment slips to their employees as this is a requirement under Fair Work laws and not under tax laws.
- The reported information will enable the ATO to identify, in real time, situations where employers are not withholding enough income tax from their employees’ wages, which may be due to employees having incorrectly completed their TFN Declaration Form (e.g. claiming tax-free thresholds from more than one job or not disclosing their HECS/HELP debt). It is also intended that the TFN Declaration Form will be replaced with an online Employee Commencement form, however it is not yet known when this may start.
- Reported information will also be available to tax agents and will appear on the ATO Business Portal of the employer.
- From 1 July 2019 the ATO is planning to start pre-filling wages labels W1 and W2 on employer Activity Statements, using the information reported to them by the employer via STP.
- The ATO will share the reported information with a number of other government agencies, in particular with Centrelink. This means that Centrelink will have up to date information in relation to the earnings of individuals and will be able to monitor in real time recipients’ eligibility for Centrelink payments.
- It is also planned that super funds (other than SMSFs) will be required to start reporting to the ATO contributions received for each member on a regular basis. This will allow the ATO to cross check contributions received by super funds with STP data and identify employers who are not complying with their superannuation guarantee obligations early. It is not yet clear when this measure is likely to commence.
Where can I get further information?
The ATO is maintaining a page dedicated to STP, which can be accessed here. It provides further details about how the reporting will work. You will also need to review communications from your payroll software provider for any guidance on STP readiness and implementation. If you need any assistance with preparing for Single Touch Payroll, please contact your Ruddicks adviser and we will help you with the process.
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