Get Ready for Single Touch Payroll in 8 Simple Steps

The ATO has introduced a compulsory new reporting system to streamline reporting of employee income and taxes. If you are a small or medium business employer, then you need to get Single Touch Payroll (STP) ready.

The idea behind STP is that as you enter your regular payroll, you also submit the information to the ATO. As the system rolls out, the ATO will start to prefill activity statements and tax returns with this information.

To ensure you are STP ready, follow these 8 steps:

1. Work out when to start

By now you should be aware of your start date. In case you’re not sure, check your employee records at April 1st 2018. If you had over 20 employees then, you must start using STP on your first payroll from July 1st 2018. If you had less than 20 employees then, you will likely be required to start from July 1st 2019 (legislation pending). You may elect to start sooner.

The 1st of April headcount includes all permanent employees (even those on leave). Casual employees are included if they worked during March 2018. Directors and committee members are not included.

2. Ensure your software supports Single Touch Payroll

If you don’t yet have payroll software, start looking at your options now! Even if you aren’t required to start until 2019, it can take time to choose and set up.

Check with your software provider to ensure they will be STP ready by your commencement date. Some software providers have extensions. If yours does, then keep using their software as normal until they upload STP.

If you will not be ready in time, apply for an extension.

3. Make sure your payroll staff know how to properly record employee entitlements.

Check that all your employee records are up to date with TFNs, correct tax options, and contact details.

Ensure your payroll officer is skilled, and trained for the change. This helps reduce mistakes, and ensures they know how to correct errors when they do occur.

4. Be aware of what is included in Single Touch Payroll

Essentially every ordinary salary and wage payment, including director or office holder remuneration, is included. Most work related payments to individuals are also included, such as return to work, termination, unused leave, parental leave, and Dad and partner payments.

You can also voluntarily include payments to individuals contracted under a voluntary agreement or a labour hire arrangement, as well as any ETP death benefits.

5. Check your contact details

Update your contact details with the ATO, so that if there are any issues, the ATO can contact you.

6. Once ready, start using Single Touch Payroll to report to the ATO

Enter your payroll using your payroll solution’s STP software, which will report each pay event to the ATO.

7. Be aware of your end of financial year obligations

After the end of each financial year you have until the 14th of July to lodge a finalisation declaration with the ATO. This declaration confirms that all of an employee’s payment information has been entered via the STP system. You won’t have to provide PAYGW summaries as employees can access their information from myGov, or directly with the ATO.

8. If you need further clarity, check with the ATO

Refer to the ATO checklist and detailed information, including webinars, for further information and clarification of less common scenarios.

Now that you’re STP ready, keep the following in mind:

• Not all payments are included in STP. If you pay anything other than typical wages, such as alienated PSI, payments to foreign residents, or royalties, check the ATO’s detailed list of payments excluded from STP reporting.
• Any individuals paid outside of STP still require an appropriate PAYGW summary.
• If you commence STP part way through the tax year, understand your options for confirming payments made prior to commencement. You will have to report these separately, or do an initial balancing pay event.
• Take extreme care with transitions if you change payroll solutions during the year, so that the ATO has the correct prefilling information.
• Mistakes can be rectified via a pay event “update”, or, if suitable, as an adjustment with the next regular pay.
• Finalisation report amendments should be made within 14 days of becoming aware of an error. You can let the ATO know amendments are pending by submitting a “FALSE” final indicator on an update event.
• In recognition of the transition period, the ATO will not penalise late reporting for the first 12 months of STP use. However, if they issue you written notice that you have failed to report on time, then you are likely to be penalised going forward.
• Now go get your business STP ready! As always, for tailored advice ensure you speak to your qualified accountant.