I didn’t know if I should write this, I was fairly sure that with all the press and information around Single Touch Payroll (STP) that everyone would know about it. Then I found a post on Kochie’s Business Builders that showed a whopping 55% of small businesses have no idea what STP is and another 20% believe that this doesn’t apply to them.
I was gobsmacked, I had no idea that it was still such a mystery.
What is STP?
The ATO has implemented STP as a way of getting payroll and super information directly from your software to their system. This is done each time you process a pay run for your employees from Xero.
Who needs STP?
STP applies to every business who employs staff whether it’s 1 person or 19, with a few exceptions.
If you have more than 20 employees then you should have started this back in July 2018. The deadline to start is 1st July 2019. If you are due to commence STP on 1st July 2019 but aren’t ready, you can apply for a deferral through the Australian Tax Office (ATO).
If your software offers STP then you can start reporting anytime between 1st July and 30 September 2019.
If you need more time to get set up then you are required to apply for a deferral prior to 30th September 2019.
If you employ between 1 – 4 employees and don’t currently use any software there are other options for you to report the STP to the ATO, one of these is to ask your Accountant or BAS Agent to lodge these quarterly for you. This option will be available until 30th June 2021.
The simplest and cheapest option to become STP compliant is to take advantage of Xero’s $10 per month payroll only plan.
Here’s the link to this option with more information too https://www.xero.com/au/resources/single-touch-payroll/1-4/
Who doesn’t need to use STP?
You can apply to the ATO for an exemption if you live in an area that has intermittent or no internet connection.
If you employ family members, are a director or shareholder of a Company, or a Trustee of a Beneficiary Trust, there are flexible reporting options available to you.
The ATO refers to this group as “closely held payees”.
These flexible reporting options are available as they have recognised that these payees are not always paid a regular wage but may instead draw or use part of the income from the business for their personal use.
As STP information is sent to the ATO each payroll, employers would not be able to report this group that way.
How to become compliant
If you already use software for your payroll then it’s a matter of registering with the ATO and then one more step each pay run to lodge with the ATO.
For Xero users to register, click the “Get started” button on the “pay employees” tab, this will provide you with the steps to register. If you use a BAS Agent or Accountant, they may need to register for you and advise that you process the payroll.
If you don’t use software, Xero has a Payroll only plan for $10 per month which can process the payroll for up to 4 employees, in my opinion, this is the easiest way to stay compliant with the ATO.
What Xero offers
For the 2.3 million small businesses of which 400,000 odd are micro business owners there are some who still use either outdated software or spreadsheets.
Xero has created a payroll only plan for $10 per month, so these businesses can comply with the ATO regulations.
Old way – Payment summaries
One of the huge benefits that has come out of the STP is that “Payment Summaries” (or group certificates as they were previously known) will no longer be required, as this information is fed directly from the software to the ATO.
New way – STP
The way STP is sent to the ATO will depend on which type of software you choose. This can be either –
- A program which will send the information directly to the ATO from the software
- A program which will send the information to the ATO via third-party software
- Your payroll info is sent to the ATO via a third party sending service provider outside of the payroll software.
Mistakes can happen, when this occurs with STP, they can be corrected during the next pay run. There won’t be penalties for errors in the first 12 months.
How the ATO makes it easier
When the end of financial year rolls around, you will need to finalise the pay runs in Xero so that the ATO has final figures for each employee. This removes the need to provide employees with their payment summaries.
Employees tax returns can be completed by either a Tax Agent or by logging on to My Gov online and finding the information.
From 2020 the ATO will prefill fields W1 & W2 on the Business Activity Statement with the information provided from you for each quarter.
For any business that needs more information and the steps to become compliant, whether this is setting up STP or applying for a deferral, contact either your Bookkeeper or Accountant.
This link https://www.ato.gov.au/Business/Single-Touch-Payroll/About-Single-Touch-Payroll/ will give you more information.