If you’re doing business in Australia, you may have heard about Single Touch Payroll as a compulsory regulation to follow as of 2018-19. But what is Single Touch Payroll?
Single Touch Payroll (STP) is the latest method of reporting tax and superannuation information to the Australian Tax Office (ATO).
The system was put in place both for employers and employees in Australia; to streamline the payroll reporting process for employers and to ensure clarity and accuracy around employees’ entitlements, such as their PAYG withholding and superannuation funds.
How does Single Touch Payroll work?
The Single Touch Payroll system works by sending the information directly to the ATO at the same time as your standard pay run. This can be done using STP-enabled payroll or accounting software.
But, there are a number of ways to report. You may choose to send the data through your existing payroll or accounting solution if it is STP-enabled. If not, you will need to choose specific STP-enabled payroll software.
Not sure if you have the appropriate software in place? Ask your existing software provider and check the STP product register to find official STP software.
Smaller companies with 1-4 employees are eligible to use a low-cost solution which will cost no more than $10/month.
Alternatively, you may also leave all reporting to a third party, such as a local payroll service provider or registered tax or BAS agent. With this option, your payroll provider will ensure that your data is consolidated accurately and sent to the ATO on an ongoing basis. Outsourcing payroll altogether may be particularly beneficial for foreign companies doing business in Australia and for medium- to large-sized enterprises with numerous employees on their books.
What kind of information should you report?
In each report, required employee payroll information includes salaries and wages, PAYG withholding, and superannuation liability.
Under Single Touch Payroll (STP), certain payments are either mandatory or voluntary to report. See the ATO website for a full breakdown of reporting requirements, classifications, and exceptions.
At the end of the financial year, employers must finalise their STP data. This means you are making a declaration that you have completed your reporting for the financial year.
Once you finalise your data, your employees’ income statement will be marked in the ATO online service platform as ‘tax ready’. They, or their registered agent, will use the income statement to lodge their tax return.
It is not necessary to provide the ATO with a payment summary annual report for payments reported through STP.
As with many business-related regulations, government-required payroll procedures and technologies change frequently. Understanding, consolidating and declaring each of your employees’ salary, benefits, and tax liabilities can be challenging.
For companies without an existing payroll and accounting department, it is advisable to consider payroll outsourcing to ensure your employees are paid and your business remains up-to-date – and compliant!