From 1 July 2018, employers with 20 or more employees will be required to report to the ATO using Single Touch Payroll (‘STP’).
Real Time Reporting to the ATO
STP requires employers to report to the Australian Taxation Office (‘ATO’) information on employees’ salaries and wages, allowances, deductions, PAYG Withholding and superannuation in real-time, at the time they pay their employees which the ATO are calling a ‘pay event’. This will mean an automatic transfer of data between an employer’s payroll provider and the ATO at the time when a payrun is finalised. It is important to note an employer’s payroll cycle does not need to change and the employer can continue to pay its employees as usual.
‘Substantial Employers’ to Report from 1 July 2018
If an employer has 20 or more employees on 1 April 2018, the employer will be regarded as a ‘substantial employer’ and will have to report through STP from 1 July 2018. If the employer is not a ‘substantial employer’ then the STP rules will apply from 1 July 2019 subject to the law being passed.
Head Count of Employees on 1 April 2018
An employer will have to perform a headcount of the number of employees on its payroll on 1 April 2018 to determine if they will be considered a ‘substantial employer’. A headcount of employees may be different to the number of an employer’s full time equivalent (FTE) staff. An employee for this purpose is defined as someone who is a full time, part time or casual employee including those based overseas or on leave. However, the headcount does not include employees who ceased their employment before 1 April 2018, casual employees who did not work in March 2018, independent contractors, staff provided by a third party labour organisation, and company directors or office holders who do not receive a salary.
Once an employer is considered to be a substantial employer, the employer will be required to continue reporting through STP even if their employee numbers drop below 20.
If an employer becomes a substantial employer on 1 April 2018, the employer will need to choose a payroll solution that is STP-enabled and suits its business needs. HLB Mann Judd would be pleased to review your current software provider to determine whether they will be STP-compliant by 1 July 2018.
Review Payroll Software Now
As STP information will be sent directly to the ATO from the employer’s chosen payroll software it is vital that the information is correct and current. We therefore recommend that employers perform a risk review of all the information and settings (including tax free thresholds, HELP, salary sacrifice, superannuation) to ensure that the data sent is accurate. This will help employers to prepare their systems for far more frequent reporting of payroll information to the ATO. Employers should consider reviewing their payroll processes now to be ready for an easy transition to the STP requirements.
Changes to Year End Reporting
Another change that STP brings is that employers will no longer be required to provide year-end payment summaries to employees for the payments reported through STP. This is largely due to the fact that employees will be able to view their payment information using their myGov account. The ATO has advised that if employers do not lodge PAYG payment summaries they will be required to prepare a new report called a ‘Finalisation Declaration’. This is a declaration prepared in an approved form stating that an employer has fully reported for the financial year for each employee using STP.
Advise Employees to Open myGov Accounts
Importantly, with the STP changes it is essential that employees have access to their myGov accounts as this is where they will be able to see all year-to-date information, including tax and superannuation. It will also be where they can complete Tax File Number Declaration and Superannuation Standard Choice Forms going forward. We therefore recommend that employers advise their employees to open a myGov account if they have not already done so. While this is not mandatory, employees will need a myGov login if they want to be able to access this information throughout the year.
Further information on STP can be found at: