STP is new way of reporting tax and super information to the ATO. Businesses with 20 or more employees already report this way but, on 1 July 2019, it was expanded to include employers with 19 or fewer employees. The information is sent to the ATO either directly from your payroll software, or via a third party provider.
Earlier, it was confirmed by the Australian Taxation Office (ATO) that from 1 July 2021, all small employers will have to register for Single Touch Payroll (STP). This published document consists of all the critical information related to single touch payroll for employees.
In this blog, we have clubbed together all the necessary guidelines related to ATO single touch payroll reporting including exemption details, benefits, reporting options, software solutions, and more.
What is Single Touch Payroll And how DOES it work?
- Single touch payroll is a recent regulation that has made it mandatory for all small businesses to report their tax and superannuation information to the Australian Taxation Office (ATO). It aims to streamline the reporting obligations for the employer and employee and eliminate the need for manual reporting to other government agencies.
- STP was already practised by businesses with 20 or more employees, but from 1 July 2021, an employer with 19 or fewer employees will also have to report the information to single touch payroll ATO.
- Previously, a small employer with 19 or fewer employees used to provide their information to the ATO annually. However, with STP, their tax and superannuation information will be shared automatically after each payday. The information is sent to the ATO either directly from payroll software, or via a third-party provider.
How will Single Touch Payroll work?
Is there any benefits?
One key change, which most businesses will see as a benefit, is that you will no longer need to prepare payment summary annual reports.
This is because they will be getting all the data they need every payrun. You also won't be required to send your employees their payment summaries because the ATO will use your STP reports as their record of pay, tax and superannuation contributed.
Employees will instead be able to see the equivalent of a payment summary in their myGov account.
What do I need to do to ensure compliance?
Firstly, you won't be able to use paper forms for any STP reporting - you'll have to submit the required payroll data online.
Most businesses already using an online payroll system should be able to simply request an STP data transfer addon.
Popular payroll systems such as Xero, MYOB, Keypay and ClockOn all have an STP transfer service enabled which can quickly and easily be switched on.
If you're not using an online payroll system, the ATO have put together a list of recommended no-cost or low-cost solutions.
As well and ensuring your business is STP compliant, you will most likely find some other benefits and efficiencies to using an online payroll system.
Who Is Exempt from Single Touch Payroll?
Single touch payroll exemption includes exemptions for a particular financial year or certain types of employers, employees, and payments.
Small employers having a withholding payer number (WPN) are exempted from STP reporting for financial years 2018–19 to 2021–22. You will have to start reporting STP from 1 July 2022.
What Are The Reporting Requirements of Employers To Comply With STP?
Every small employer with 19 or fewer employees will have to report the following information to single touch payroll on ATO:
- Salaries and wages
- Pay as you go (PAYG) withholding
- Foreign employment income.
- Payments made to closely held payees
What Are The STP Reporting Options?
The reporting system and concessions available for Single Touch Payroll (STP) will depend on the number of employees you have.
When counting employees for STP reporting, you should include all employees, not their full-time equivalent (FTE). Your headcount should include:
- Full-time employees
- Part-time employees
- Casual employees
- Employees based overseas
- Any absent employee or those on leave (paid or unpaid)
Don't include the following individuals in your headcount:
- Employees who are not working for you anymore
- Independent contractors
- Staff provided by outsourcing labour-hire company
- Officeholders
- Religious practitioners
- Closely held payees (family business, directors or shareholders of a company and beneficiaries of a trust)
Also Read: Single Touch Payroll: Changes From 1 July 2021
Employers With One To Four Employees
- If you are a micro employer (one to four employees) and don't use any payroll solution, there is another way you can still report STP information. ATO has also listed several digital service providers who offer no-cost and low-cost STP solutions for micro employers - Payroll software, mobile phone apps, and portals.
- For those micro employers who use a registered tax or BAS agent and meet the eligibility criteria, quarterly reporting concession is temporarily available until 30 June 2021. However, you should know that this concession will be only considered in case of some exceptional circumstances.
Employers With 19 or Fewer Employees
STP already started for small employers with 19 or fewer employers from 1 July 2019. In case you haven't started STP reporting, here are a few critical steps to follow:
- Start reporting now - If you are already using STP-enabled software, then start reporting now. In case you don't have any idea about what you need to do, get in touch with your software provider. If you an existing ClockOn customer, ask one of our professional for a single touch payroll checklist.
- Choose an STP-enabled software – if you don't use payroll software, then start by searching for a suitable STP-enabled software solution.
- You can ask a third party such as a registered tax or BAS agent or a payroll service provider to report STP on your behalf.
- Check whether the concessional reporting option is suitable for you or not.
In case you are unable to start reporting due to some circumstances, apply for a deferral. If you meet the necessary criteria, you may even apply for an exemption.
Employers With 20 or More Employees
For employers with 20 or more employees, STP reporting started from 1 July 2018. You should be reporting through single touch payroll now. If you don't use any payroll software, start by searching for a suitable STP-enabled software solution. Additionally, your registered tax or BAS agent can also help with it.
What Are The Benefits of Single Touch Payroll?
- One of the main benefits of single touch payroll is that it helps small employers to streamline their reporting process to the ATO. Since information will be already provided after each payroll cycle, the ATO will pre-fill PAYG sections of the business activity statement (BAS) on behalf of the employer. As a result, it eliminates the risk of potential errors and double handling. Additionally, employers no longer have to prepare Payment Summaries and the Annual Payment Summary Statement.
- Additionally, the changes in reporting requirements can assist employees when completing their Individual Income Tax Return (IITR) and ensure their income-tested payments are correctly calculated. Further, new employees can also lodge their Tax File Number Declaration and Super Choice Forms through STP.
How Often Will I Need To Report STP?
- As an employer, you will have to send your tax and superannuation information on or before each payday. There is no need to bring any changes to your pay cycle. You can continue to pay your employees based on your scheduled payment cycle i.e. weekly, fortnightly or monthly.
Existing ClockOn Customer?
Simply register for ClockOn’s Managed STP Service via the link above. The ClockOn implementation team will assist you in the setup allowing you to easily report to the ATO through ClockOn’s STP Wizard. The steps involved will be:
- Approve and validate your timesheets – as normal
- Process your payroll in ClockOn – as normal
- Generate your employee’s payslips – as normal
- Export and upload the EFT files to your bank – as normal
- Run a Payroll Submission in the Single Touch Payroll Wizard
How often will I need to report?
You will be required to send your tax and super information on or before each payday. The ATO calls this a ‘pay event’.
You are not required to change your current pay cycle and you can continue to pay your employees weekly, fortnightly or monthly. You can also have different pay cycles for different employees if that is required.
What do I do if I have made a change to an employee?
If changes are made to the employees YTD values that were submitted such as their payroll was rolled back and reprocessed differently or the YTD values were manually altered in the employee setup.
The figures will be updated in the next pay cycle, once you have performed a payroll submission. These changes do not need to be updated each time a change is made.
More information on STP for existing ClockOn customers.
Want to know how to set up single touch payroll through payroll software? We can help!
The ClockOn implementation team will assist you with the setup allowing you to easily report STP to the ATO through ClockOn’s STP Wizard.
Download ClockOn’s FREE Single Touch Payroll software
What is STP Phase 2?
STP Phase 2 expands on the reporting requirements introduced in Phase 1, and from 1 January 2022, employers must report additional information to the Australian Taxation Office (ATO) on or before each payday, including:
- Closely held payees: Employers must report payments made to closely held payees, such as family members, directors or shareholders of the business. The ATO has allowed a concession for small businesses with closely held payees, and they will have until 1 July 2022 to report these payments.
- Child support deductions: Employers must report child support deductions made from employee salaries.
- Salary sacrifice amounts: Employers must report the gross amount of any salary sacrificed superannuation amounts.
- Reporting for more than one payroll solution: If an employer uses more than one payroll software, they must report for each payroll solution separately.
- Changes to the way activity statements are lodged for micro employers: Micro employers (with 1-4 employees) who do not have a registered tax or BAS agent, can elect to lodge their business activity statements (BAS) annually instead of quarterly. STP Phase 2 requires that these employers report through STP before the due date for the BAS.
