STP, Single Touch Payroll is changing the way businesses in Australia report their salaries, wages, PAYG withholding and superannuation to the Australian Taxation Office.
The requirements are to report information each time you pay your employees. Single Touch Payroll requires a direct connection from your Accounting software to the ATO. Xero is our preferred software provider and is STP ready.
How does STP work?
When you process your payrun, you will find an additional step to file the information to ATO. The information will transmits electronically from Xero to the ATO.
Once STP accepts, the ATO distributes the information to the employee records. This information appears in the employees myGov account. It is important to inform your employees to start a myGov account.
Your employees can see their year-to-date wages, tax and super information at anytime. You access this via ATO online services, through employees personal myGov account. Their data updates every time you report (each pay day for most employers). Prior to STP reporting, employee’s data was reported at the end of the financial year.
You will no longer issue year end payment summary your employees. Your payroll information has already been reported each payrun meaning payment summaries are irrelevant. You will need to finalise your payroll using Xero and STP processes. Once you finalise your data, your employees or their registered agent will be able to lodge their income tax return using the STP information available in myGov.
From 2020, the ATO will pre-fill activity statement W1 and W2 using the information reported through STP. If you currently lodge an activity statement you will continue to do so. Account Aspects offers services to prepare and lodge your BAS prior to the deadlines.
STP reporting will include superannuation liabilities for the first time. Superannuation funds will also report payments made on behalf of employees to the ATO giving greater transparency over outstanding obligations. This is an important step toward making sure employees receive their correct entitlements.
What are the benefits of STP?
- Streamlined reporting with greater connectivity with the ATO – The process of reporting is seamless and easy. You do not have to login or upload files. The pressure relieves small business owners from a process that is thrawed with red tape.
- Businesses are on a level playing field – All businesses paying staff need to report with STP. Businesses on manual systems need to upgrade to complying software. Penalties will apply if businesses don’t report with STP. It is a fair system for all businesses.
- Employees accessibility to the information – Often employees have income coming from more than one source. They may have to report income for Centrelink or child care obligations. Using their myGov account they can easily access their up to date information when they need it.
- Accountability for tax & superannuation obligations – We have worked with business owners when cashflow is tight. We have found that tax and super obligations are under paid. With STP, will come transparency with the ATO and super funds chasing payments. We all need to pay tax and need super in our retirement. Why should some pay and some not. Our economy depends on it.
Who must comply?
The short answer is All employers.
Businesses with 20 or more employees were required to report through STP from 1st July 18. Businesses with 19 or less employees are required to report through STP from 1 July 2019. An extension til 30th September 19 gives businesses time to upgrade their software systems.
If you are not reporting with STP, penalties may apply. The important thing is to start. Account Aspects have been using Xero since 2011 and have successfully converted many clients to Xero and STP reporting. Our services include support, regular ongoing bookkeeping, payroll services, Xero training and more.