On February 12th 2019, the Australian parliament has passed legislation to extend Single Touch Payroll (STP) reporting to include all small businesses (fewer than 20 employees) from July 1st 2019. Until the change occurs, many employers are still confused and uncertain about this tax means. So let’s start to find out what is STP and how it affects the business environment.
What is Single Touch Payroll (STP)?
Single Touch Payroll (STP) is a tool for businesses in Australia to lodge their salaries, wages, PAYG withholding and superannuation to the Australian Tax Office (ATO). Rather than reporting payment by paperwork once at the end of a financial year, you will now be inquired to send information to the ATO with every pay run in an online way. STP is a more regular and streamlined way of receiving payroll and superannuation data from employers.
Advantages of STP
The advent of STP leads to many positive changes in the Australian business community. Because of being a product of technology, STP brings fast, accurate and convenient benefits to payment process of employers:
By sending information to the ATO every payroll event instead of once a year in July, you can save valuable time to do other things when the end of financial year comes.
The ATO pre-fills PAYG withholding payroll fields W1 & W2 in your BAS, eliminating potential errors and double handling.
Employees will no longer need to wait for their owners to release the payment summaries. Now they can get their year-to-date tax and super information in their Income statement via myGov account linked to ATO online services.
Are there any risks?
However STP is very useful, it still has some risks causing employers to feel nervous. According to MYOB’s data, many eligible businesses are still not using the STP system.
The ATO will be able to raise penalties against a business for failing to comply with single touch payroll rules. Nonetheless, during the first year of STP coming into effect, businesses that fail to report on time will be exempt from an administrative penalty.
Employers will need to ensure their payroll system is STP - enabled to be compliant with the new law. This may involve an additional cost for small employers, particularly those that do not currently use software-based payroll systems.
STP helps ATO to find businesses and owners that did not process salary and superannuation payments correctly. Even minor breaches can result in a significant financial cost to the business once on-costs such as payroll tax, workers' compensation and the potential for fines and penalties are applied to both the employer and director.