Arguably Australia’s most important piece of payroll legislation this century, the new Single Touch Payroll (STP) system will come into effect on 1 July 2018.
STP will be mandatory for all organisations with 20 or more employees - although those with fewer staff may still need to use it for reporting purposes from July 2019, depending on what happens during the passage of the legislation. Whatever the outcome, all employers will need to check their headcount on 1 April 2018 to see whether they are obliged to report through STP, according to HR Business Review.
How will employers benefit from STP?
- STP will help employers fulfil their obligation to provide employees and/or the Australian Taxation Office (ATO) with payment summaries, which include those relating to individual non-business, foreign employment income and employment termination payments;
- The requirement for employers to lodge a tax file number (TFN) declaration with the ATO will no longer stand;
- Employees will be able to access validated employee data through MyGov. It will also be available to STP-compliant solution providers;
- STP reporting will be based on year to date (YTD) balances and will allow employers to make adjustments - even for a prior payroll period - in future reports. This feature should potentially give employers the flexibility to correct errors and omissions in subsequent pay runs;
- The ATO will be able to spot employers struggling to meet their obligations and intervene to provide them with early-stage assistance;
- Activity statement compliance will become more efficient: statistical labels will be removed from the activity statements of large withholders (gross wages and W1) and withholding-related labels on monthly and/or quarterly activity statements can be filled out in advance.
How will employees benefit from STP?
- Employees will have more control over monitoring and actively managing their tax and superannuation (pensions) balances, which includes accessing MyGov. Both superannuation choices and TFN declarations can be completed at ATO online;
- The ATO will provide a drop-down list of all superannuation funds in which an individual employee has a balance/account with their employer’s default fund(s). The same will apply to YTD payroll details, which includes superannuation balances and the provision of a consolidated view of an employer's entire reporting for a given employee.
STP and Superbad – what is the connection?
The recent Senate Economics Committee’s review into non-compliance with the Superannuation Guarantee (SG) led to the publication of a report entitled: ‘Superbad – Wage Theft and Noncompliance of the Superannuation Guarantee’. The committee made a total of 32 recommendations, with many involving legislative change and fundamental alterations in the way the SG system is currently administered.
Soon after the report was published on 29 August 2017, the government announced a further package of reforms to give the ATO near real-time visibility into whether employers are SG-compliant. The reforms include measures to:
- Ensure that the ATO receives superannuation funds report contributions more frequently - at least monthly - helping it to identify non-compliance and take swift action;
- Improve the effectiveness of the ATO’s recovery powers, including strengthening director penalty notices and the use of security bonds for high-risk employers, in order to improve the collection of unpaid superannuation and ensure it is paid into employees’ superannuation accounts;
- Allow the ATO to seek court-ordered penalties in the worst cases of non-payment, which includes employers who are repeatedly caught but fail to pay superannuation guarantee liabilities;
- Provide the ATO with additional funding for a SG taskforce to crack down on employer non-compliance.
How should employers prepare?
Here are some suggestions:
- Review processes: Check the robustness of delegation processes as they control who is able to access, edit and authorise payroll. STP could be a good catalyst to help streamline your payroll processes and add additional checks and balances;
- Check the accuracy of data: Many businesses deal with inaccuracies in their payroll data as part of a big reconciliation and clean-up process at the end of the financial year. But every STP Pay Event could now require this type of checking and correction. Therefore, because STP adds layers of transparency to payroll reporting, data must be kept as clean as possible at all times;
- Educate and engage employees: Talk to your employees about the benefits of STP reporting. If they have not already done so, they should look into setting up a MyGov account and linking to ATO online. Without an account, they will be unable to review their balances and/or print their YTD summary. You should also inform your employees as to what new onboarding processes will be introduced under STP. This includes how to deal with TFN declarations, superannuation choice and Pay as you go withholding variation forms.
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.
Arguably Australia’s most important piece of payroll legislation this century, the new Single Touch Payroll (STP) system will come into effect on 1 July 2018.
STP will be mandatory for all organisations with 20 or more employees - although those with fewer staff may still need to use it for reporting purposes from July 2019, depending on what happens during the passage of the legislation. Whatever the outcome, all employers will need to check their headcount on 1 April 2018 to see whether they are obliged to report through STP, according to HR Business Review.
How will employers benefit from STP?
- STP will help employers fulfil their obligation to provide employees and/or the Australian Taxation Office (ATO) with payment summaries, which include those relating to individual non-business, foreign employment income and employment termination payments;
- The requirement for employers to lodge a tax file number (TFN) declaration with the ATO will no longer stand;
- Employees will be able to access validated employee data through MyGov. It will also be available to STP-compliant solution providers;
- STP reporting will be based on year to date (YTD) balances and will allow employers to make adjustments - even for a prior payroll period - in future reports. This feature should potentially give employers the flexibility to correct errors and omissions in subsequent pay runs;
- The ATO will be able to spot employers struggling to meet their obligations and intervene to provide them with early-stage assistance;
- Activity statement compliance will become more efficient: statistical labels will be removed from the activity statements of large withholders (gross wages and W1) and withholding-related labels on monthly and/or quarterly activity statements can be filled out in advance.
How will employees benefit from STP?
- Employees will have more control over monitoring and actively managing their tax and superannuation (pensions) balances, which includes accessing MyGov. Both superannuation choices and TFN declarations can be completed at ATO online;
- The ATO will provide a drop-down list of all superannuation funds in which an individual employee has a balance/account with their employer’s default fund(s). The same will apply to YTD payroll details, which includes superannuation balances and the provision of a consolidated view of an employer's entire reporting for a given employee.
STP and Superbad – what is the connection?
The recent Senate Economics Committee’s review into non-compliance with the Superannuation Guarantee (SG) led to the publication of a report entitled: ‘Superbad – Wage Theft and Noncompliance of the Superannuation Guarantee’. The committee made a total of 32 recommendations, with many involving legislative change and fundamental alterations in the way the SG system is currently administered.
Soon after the report was published on 29 August 2017, the government announced a further package of reforms to give the ATO near real-time visibility into whether employers are SG-compliant. The reforms include measures to:
- Ensure that the ATO receives superannuation funds report contributions more frequently - at least monthly - helping it to identify non-compliance and take swift action;
- Improve the effectiveness of the ATO’s recovery powers, including strengthening director penalty notices and the use of security bonds for high-risk employers, in order to improve the collection of unpaid superannuation and ensure it is paid into employees’ superannuation accounts;
- Allow the ATO to seek court-ordered penalties in the worst cases of non-payment, which includes employers who are repeatedly caught but fail to pay superannuation guarantee liabilities;
- Provide the ATO with additional funding for a SG taskforce to crack down on employer non-compliance.
How should employers prepare?
Here are some suggestions:
- Review processes: Check the robustness of delegation processes as they control who is able to access, edit and authorise payroll. STP could be a good catalyst to help streamline your payroll processes and add additional checks and balances;
- Check the accuracy of data: Many businesses deal with inaccuracies in their payroll data as part of a big reconciliation and clean-up process at the end of the financial year. But every STP Pay Event could now require this type of checking and correction. Therefore, because STP adds layers of transparency to payroll reporting, data must be kept as clean as possible at all times;
- Educate and engage employees: Talk to your employees about the benefits of STP reporting. If they have not already done so, they should look into setting up a MyGov account and linking to ATO online. Without an account, they will be unable to review their balances and/or print their YTD summary. You should also inform your employees as to what new onboarding processes will be introduced under STP. This includes how to deal with TFN declarations, superannuation choice and Pay as you go withholding variation forms.
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.
