Fortunately, the days of manually processing payroll, calculation of tax deductible from tax tables, cashing a cheque so that you have exactly the right number of notes and coins and filling the wage envelopes to hand out to each member of staff have long gone. The invention of computers and their advancement over the last thirty or so years has meant that payroll can be processed in a fraction of the time. Net pay can easily be transferred to each employee’s nominated bank account and PAYG, Superannuation and Payroll Tax liabilities reported to the ATO via the monthly or quarterly Business Activity Statement (BAS).
The natural next step would have been seen to be an automated reporting mechanism in real time to enable businesses to report, at the click of a mouse button, to the ATO the liabilities created by each payroll. From this expectation Single Touch Payroll (STP) was implemented for all businesses in Australia from 1 July 2019.
If you are a small business owner that pays staff via the PAYG system, you now have an obligation, with very few exemptions, to report your employee payroll to the ATO on a real time basis. The primary exemptions are micro employers of 1-4 employees (although they still have to be compliant from 01 July 2021), closely held employees, seasonal and intermittent employees and employers of inbound assignees.
There are currently four ways to report via STP.
- Your existing payroll software should have been updated by the providers to accommodate STP in the months preceding the 01 July 2019 deadline. If so, you can file directly from the software.
- If you have more than 4 employees and don’t currently use a payroll software which is STP compliant you will need to look for and implement a suitable product.
- If you have 1-4 employees you will find on the ATO website, a list of no cost and low-cost solutions that you will be able to use
- You can ask your BAS agent to submit on your behalf or outsource your payroll to an external payroll provider and have them process your payroll, if they are able to report via STP. Be aware that any payroll service providers must be registered as a tax or BAS agent to be compliant.
By introducing the STP system, the ATO have ensured that wage and salary records are automatically kept up to date and, especially in the case of non-payment of superannuation, be up to date with each of the liabilities that the employer owes for their employees in real time. Non-payment of superannuation is seen to be a serious matter and has been likened to wage theft In the Australian media. By reporting the liability to the regulatory authorities as and when the liability is created, it will help to ensure that employee superannuation is paid on time. The system may also allow employees to submit tax returns as soon 1 July each year comes as they will not necessarily need to wait for their payment summary to be lodged as their record will have been updated as each and every pay run is completed.