Payroll changes for all employers
Single Touch Payroll
Legislation has recently been passed by parliament that takes effect from 1 July 2019, where all employers will be required to report to the ATO using Single Touch Payroll (‘STP’). Employers with 20 or more employees were required to do this from 1 July 2018 so this legislation is expanding the requirement to any employer, including micro employers who have between 1 and 4 employees, from 1 July 2019.
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 employer will need to use some form of payroll software to allow 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.
If an employer is already utilising some form of payroll software it is important they confirm firstly that the provider is STP compliant. If they are, we 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 via automatic transfer to the ATO 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.
If an employer is not already utilising a payroll software they must now look to do so. The ATO have said however that they are looking to provide different reporting options to employers with 19 or less employees so there may be other options released closer to 1 July 2019. One of these which they have confirmed is for micro employers, being 1-4 employees. They have asked software developers to build low-cost STP solutions at or below $10 per month which will include simpler payroll software, mobile phone apps and portals. Many of the major payroll providers have already confirmed they have developed or are developing such options.
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.
For further information on STP, please click here.
Please contact TNR if you have any queries or require assistance.