Single Touch Payroll (or STP) is a new initiative set up by the Australian Taxation Office (ATO) to streamline payroll reporting for companies. It is designed as a new, simpler way to reduce your reporting responsibilities and compliance processes.
What is Single Touch Payroll?
Single Touch Payroll is the electronic reporting of salaries and wages, PAYG withholding and superannuation payment information by employers.
How does it work?
When you process your normal payroll run, whether this is weekly, fortnightly or monthly, you will send your employees’ their payslips. At the same time, this information will be sent directly to the ATO through your accounting or payroll software.
Your payment due dates for PAYG and superannuation payments will not change, just the reporting will be made easier.
When does Single Touch Payroll start?
Employers with 20 or more employees have been reporting through Single Touch Payroll from 1 July 2018.
Single Touch Payroll will be mandatory for employers with 19 or fewer employees from 1 July 2019. However, the ATO have introduced a number of alternative options and concessions to help make the transition to STP easier on small business.
- Small businesses can start reporting any time between 1 July to 30 September 2019 with deferrals granted for small employers who request additional time to report STP.
- There will be no penalties for mistakes, missed or late reports for the first year.
- The ATO will provide exemptions from STP reporting for businesses experiencing hardship or businesses located in areas with no or limited internet connection.
To help micro-businesses (less than 4 employees) transition to STP there are a number of options such as allowing those that rely on a registered tax or BAS agent to report quarterly for the first two years, rather than each time payroll is run.
How to prepare
If you, like the 70% of micro-employers (those with one-four employees) from a YouGov survey in April 2019, have no idea what the program is, following these steps will get you on track for Single Touch Payroll.
- Check your accounting or payroll software is STP compliant. Most accounting and payroll software is compliant now.
If you are not currently using any software or electronic system to record payroll, the ATO have organised for the popular accounting software companies to offer low cost payroll options to get you up and running.
This is the time to nab a great deal on payroll software, with cloud accounting software companies offering discounted pricing and most run a free trial so you can try before you buy.
Reckon has unlimited number of employees payroll, and STP compliance for $5 per month.
QuickBooks is offering their Simple Start package at half price ($7.50 per month, normally $15) up until June 28, 2019.
- Ensure your staff are fully trained on the functionality of the software.
- Include STP in your updated internal processes. This will make for a smoother transition and improved communication with staff changes.
- Educate all employees about the STP and the changes that affect them. The STP will change how they receive their payment summaries at the end of the financial year. They will also need to set up their myGov account in preparation for the STP. They can use this account to check all their year-to-date wages, super and taxes at any time.
Benefits of Single Touch Payroll
The key benefit of the STP is the streamlining of your payroll reporting to the ATO and reduced compliance issues.
- All employees will be able to view their year-to-date pay details, super payments and PAYG amounts directly through myGov.
- With STP, when you send your employees their payslips and pay information, this is reported directly to the ATO at the same time. There is no need to remit reports at the end of the month or quarter regarding payroll.
- Payment summaries will not need to be printed or sent out to each employee – their payment summaries can be accessed directly from their myGov account at any time after year-end.
- Although this feature will not be immediately available, employers will be able to get new employees to complete Tax File number declaration, superannuation standard choice and Withholding declaration online.
How do I set up my accounting software?
All the major accounting and payroll software systems are STP ready. Read below to find the accounting software your business uses and click on the link to find instructions on how to set up Single Touch Payroll.
Before you start setting up systems, International Accounting Solutions recommend you check out Xero’s FAQs on STP compliance to gain a greater understanding of STP.
Here are the instructions to follow, when you are ready to set up Xero for Single Touch Payroll.
MYOB recommends you finish your last pays for June and preparing your payment summaries. Once that’s out of the way, you’re ready to set up STP for the new payroll year.
You’ll need an internet connection to complete the setup, but your company file doesn’t need to be online.
There are two parts to the STP set up process – firstly you’ll set up for ATO Supplier Settings, then you will need to set up the Electronic Lodgement & STP.
First things first – ensure all settings are complete before jumping ahead and lodging pay events. Sage strongly suggest you complete each of the steps in the order in this handy document:
Still not sure if you are STP compliant?
More information on STP is available in the ATO’s factsheet.
If you have any questions or concerns how STP will work with your business, write to us or contact +61 2 8298 5301 to schedule a free call with our payroll experts to go through your STP preparation.
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