Australia tries to simplify Single Touch Payroll for small firms Australia tries to simplify Single Touch Payroll for small firms

Australia tries to simplify Single Touch Payroll for small firms
26 Sep 2018

The Australian Taxation Office (ATO) has announced new guidelines to help make it easier for small and medium enterprises (SMEs) to use Single Touch Payroll (STP) reporting.

The ATO will now permit accountants and tax agents to act on behalf of SMEs for STP lodgements to make life less stressful if they are struggling to implement the new system. The permission, known as an ‘STP engagement authority’, will only be available to organisations without any overdue activity statement lodgements or outstanding debts. They must also not have been subject to ATO non-compliance activity for Pay-As-You-Go withholding.

Under the previous system, companies that submitted payroll data to the ATO via tax agents would have needed to have a lodgement agreement signed off each time, creating problems for businesses such as labour-hire firms, which had to submit information on a frequent basis. 

The new authority will enable organisations to sign a single agreement with their accountant to cover 12 months’ worth of STP lodgements. But the ATO requires the agreement to be re-negotiated if there is any significant change in an organisation’s industrial relations, taxation situation or payroll process.

Paul Drum, head of public policy at CPA Australia, told Smart Company he believed the new measures introduced by the ATO were a “good outcome”.

"They’re a pragmatic solution to the unintended consequences of the STP regime. It means tax agents can have a standing engagement with clients that doesn’t have to be signed off by the clients every time," he said.

But Murray Howlett, tax specialist at Pilot Partners, said the change would not affect many companies as most lodge their payroll information via an in-house payroll officer, who does not need to provide the same level of authorisation to the ATO.

"Most businesses of a small nature are looking after payroll through MYOB or Xero [payroll software] or whatever, and they have an internal employee doing the processing, so they don’t have to make the same sorts of declarations," he said. "But if you’re a relatively small operation, you might be using an accountant, so that’s why, with the new STP system, they needed this solution."

The ATO advised organisations to include various kinds of information in their authority document, such as clear outlines of the responsibilities of both the business and its accountant and agreed terms on the company’s processes for calculating and paying employees. Any taxation and pension obligations should also be outlined.

STP became compulsory for businesses with 20 or more employees on 1 July this year. It means they must now report their employees’ payroll and pension information to the ATO each time they are paid. Legislation is currently before Parliament to extend the framework to companies with fewer than 20 staff by 1 July, 2019.

Emma Woollacott

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

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The Australian Taxation Office (ATO) has announced new guidelines to help make it easier for small and medium enterprises (SMEs) to use Single Touch Payroll (STP) reporting.

The ATO will now permit accountants and tax agents to act on behalf of SMEs for STP lodgements to make life less stressful if they are struggling to implement the new system. The permission, known as an ‘STP engagement authority’, will only be available to organisations without any overdue activity statement lodgements or outstanding debts. They must also not have been subject to ATO non-compliance activity for Pay-As-You-Go withholding.

Under the previous system, companies that submitted payroll data to the ATO via tax agents would have needed to have a lodgement agreement signed off each time, creating problems for businesses such as labour-hire firms, which had to submit information on a frequent basis. 

The new authority will enable organisations to sign a single agreement with their accountant to cover 12 months’ worth of STP lodgements. But the ATO requires the agreement to be re-negotiated if there is any significant change in an organisation’s industrial relations, taxation situation or payroll process.

Paul Drum, head of public policy at CPA Australia, told Smart Company he believed the new measures introduced by the ATO were a “good outcome”.

"They’re a pragmatic solution to the unintended consequences of the STP regime. It means tax agents can have a standing engagement with clients that doesn’t have to be signed off by the clients every time," he said.

But Murray Howlett, tax specialist at Pilot Partners, said the change would not affect many companies as most lodge their payroll information via an in-house payroll officer, who does not need to provide the same level of authorisation to the ATO.

"Most businesses of a small nature are looking after payroll through MYOB or Xero [payroll software] or whatever, and they have an internal employee doing the processing, so they don’t have to make the same sorts of declarations," he said. "But if you’re a relatively small operation, you might be using an accountant, so that’s why, with the new STP system, they needed this solution."

The ATO advised organisations to include various kinds of information in their authority document, such as clear outlines of the responsibilities of both the business and its accountant and agreed terms on the company’s processes for calculating and paying employees. Any taxation and pension obligations should also be outlined.

STP became compulsory for businesses with 20 or more employees on 1 July this year. It means they must now report their employees’ payroll and pension information to the ATO each time they are paid. Legislation is currently before Parliament to extend the framework to companies with fewer than 20 staff by 1 July, 2019.

Emma Woollacott

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

OTHER ARTICLES THAT MAY INTEREST YOU

Tips on how to prepare for Australia's Single Touch Payroll system

Australian companies struggle with Single Touch Payroll compliance

The move towards straight-through processing in international payments

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