Employers may have heard their Payroll team throw around the term Single Touch Payroll Reporting (‘STPR’) recently. The STPR legislation was part of the Budget Savings (Omnibus) Act 2016 that received Royal Assent in September 2016. However, employers are only now starting to recognise what this might mean for them. The Australian Tax Office (‘ATO’) claims the STPR introduction will streamline the way employers report some tax and superannuation information to the ATO. The STPR certainly has some administrative benefits, however, there are a few things that need to be in place before the 1 July 2018 compulsory switch takes place.
From 1 July 2017, any employer regardless of size will be able to choose to adopt the STPR. However, from 1 July 2018, it will be compulsory for ‘substantial employers’ with more than 20 employees to use STPR. Once an employer is considered a substantial employer, if the number of employees decreases below 20 in a later year, it must apply to the Commissioner of Taxation for an exemption.
The main changes you will notice when adopting the STPR are:
- Ordinary Time Earnings, salary or wages and Pay-As-You-Go (‘PAYG’) withholding information will be reported and available to the Commissioner in ‘real time’ when payroll is periodically processed by the employer.
- Superannuation contributions will be reported to the Commissioner at the time the contributions are paid.
- Employers will have to acquire SBR-enabled software to comply with their PAYG withholding obligations.
- New employees will have the option of completing TFN declarations and Super Choice forms online.
- The STPR reports for PAYG withholding will become the approved form for reporting PAYG withholding (currently this is the Business Activity Statements (‘BAS’)). A failure to lodge in the approved form attracting an administrative penalty.
- Employers that have reported their PAYG withholding obligations via STPR will have their PAYG withholding prefilled by the ATO on their BAS
- However, the ATO envisages that employers will be provided with the option to pay their PAYG withholding at the same time they lodge their STP reports to further align the reporting and payment of PAYG withholding through the payroll system. That is, the amounts will be remitted earlier than is necessary under the legislation.
- Employers will no longer be required to submit an annual PAYG report to the ATO
- Employers may no longer need to provide payment summaries to employees, as the employees will have access to their payroll information via their myGov account. It is recommended that employees whose employers are changing to STPR set up a MyGov account before the change takes place, in order to access to their salary information at year end.
What’s remained the same?
- If the employer does not elect to pay at the same time they report under the STPR there is no change to the due date for payment of the PAYG Withholding liability. The payment cycle depends on the size of the employer. Large employers need to remit weekly, medium remitters monthly, small remitters on a quarterly basis.
- Likewise the STPR does not change the payment due date for superannuation guarantee, being generally on the 28th day following a financial quarter.
Pros & Cons
The implementation of the STPR will effectively introduce a two tier system of approved methods of reporting to the Commissioner. This consists of the STPR for PAYG withholding and superannuation guarantee, while all other withholding amounts are still required to be lodged and reported through BAS, e.g. FBT and PAYG Instalments. Whilst the STPR may alleviate some administrative burdens for employers and is promoted as a way of aligning existing payroll functions with reporting obligations, it remains to be seen how many employers opt to align the payment of their PAYG withholding with their STPR reporting dates after they consider the cash flow disadvantages.
A further concern is the expectation or assumption the STPR will mean that employees will be able to view their payroll related information and annual payment summary online through MyGov. This will require employees to set up an on-line MyGov account, which is a further level of administration for both taxpayers and their tax agents. Once such an account is established for tax purposes, then all tax related information such as assessments notices etc, are routinely sent to the MyGov account, rather than by post. If the employee has a tax agent there may be further administrative problems as it will require tax agents to obtain these documents from their clients, e.g. to check their assessments, which differs from current practices.
Moreover, STPR means the Commissioner will have access to even more information to perform data-matching in determining if all Superannuation Guarantee Charge (‘SCG’) and PAYG withholding obligations are met. Any errors by employers using this system are likely to drastically increase the chances of an ATO audit or review. However, it may be possible to run reports periodically from the new STPR software that show all the information that has been reported to the ATO, allowing errors to be identified in time to correct the amounts before the end of the financial year.
Before the compulsory 1 July 2018 start date, employers will need to ensure their payroll system is STPR enabled to be compliant with the new law. This may involve additional cost for employers, particularly those that do not currently use software based payroll systems A range of payroll software providers are working with the ATO on product updates from 1 July 2017. To help with the transition to STPR, it was announced in the STPR media release by the Minister for Revenue and Financial Services, that the Government will offer small businesses with a turnover of less than $2 million, a $100 non-refundable tax offset for STPR enabled software. The offset will be made available for new software purchases or subscriptions made in the 2017/18 financial year.
Further information regarding what software is compatible and how to apply for the rebate will be released closer to the 1 July 2017 initial start date.
We strongly recommend reviewing your company’s SGC and PAYG payroll processes to ensure the treatment of various types of payments and remuneration is correct, before the mandatory change to STPR for substantial employers.
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