Single Touch Payroll

Do you pay employees?

Regardless of the number of employees, or how often you pay them, you need to read this.

The ATO has implemented a new reporting system called Single Touch Payroll (STP). Single Touch Payroll requires that every time a pay run is processed, you need to report the pay and superannuation details to the ATO.

It started on 1st July 2018, with all businesses that had 20 employees or more being required to report their payroll and superannuation details to the ATO when a pay run was recorded.

Legislation was recently passed to mandate that from 1st July 2019 any business with 19 employees or less need to report the details of their payroll to the ATO as soon as the pay run is completed as well.

To be compliant with Single Touch Payroll, you must use an electronic reporting system. You cannot report STP details on your BAS.

The ATO has made differentiations based on the number of employees you have.

If you have 20 employees or more (as at 1st April 2018) you are considered a large employer. If you have 19 employees or under you are considered a small employer. Further differentiation is made for those with 4 or fewer employees, and they are classed as micro-employers and have more reporting options for STP.

In summary:

Large Employer

  • 20 employees or more
  • Reporting from 1/7/2018
  • STP compliance and reporting via payroll software only
  • Report every pay period
  • Must report electronically
  • Printed payment summaries no longer required at financial year end
  • Reported wage details will prefill W1 and W2 on your BAS from 2020
  • Employers will be able to offer online commencement forms to new employees, including Tax file number declaration, Superannuation (super) standard choice, Withholding declaration and Medicare levy variation declaration forms that can be sent to the ATO from myGov

Small Employer

  • 19 employees or less
  • Reporting from 1/7/2019 (extended to 30/9/2019)
  • STP compliance and reporting via payroll software only
  • Report every pay period
  • Must report electronically
  • Printed payment summaries no longer required at financial year end
  • Reported wage details will prefill W1 and W2 on your BAS from 2020
  • Employers will be able to offer online commencement forms to new employees, including Tax file number declaration, Superannuation (super) standard choice, Withholding declaration and Medicare levy variation declaration forms that can be sent to the ATO from myGov

Micro Employer

  • 4 employees or less
  • Reporting from 1/7/2019 (extended to 30/9/2019)
  • Report every pay period
  • Must report electronically
  • Reporting can be done directly via software, online solution, or by authorising a registered agent like a bookkeeper or tax agent.
  • Government has mandated that software solutions costing $10 or less per month be available for micro business. These can be payroll software, online reporting portals or mobile app solutions.
  • Printed payment summaries no longer required at financial year end
  • Definition of 4 employees may vary between software suppliers. Most will be based on employees paid per pay cycle per month. Over 4 per pay cycle would mean moving to a larger software subscription.
  • Reported wage details will prefill W1 and W2 on your BAS from 2020
  • Employers will be able to offer online commencement forms to new employees, including Tax file number declaration, Superannuation (super) standard choice, Withholding declaration and Medicare levy variation declaration forms that can be sent to the ATO from myGov

All businesses who are currently using software solutions for payroll need to determine if their software is to be made compliant, and upgrade to that version. If it is not being made compliant, then you will need to change to software that will be complaint.

 

What does this mean for your employees?

Employees

  • Employees will still receive payslips, but not payment summaries (group certificates)
  • Employees must get a myGov account to see wage and superannuation details reported for them.
  • Employee wage and tax details will be available for pre-filling into tax return.
  • Employee can complete onboarding paperwork online through their myGov account. Employee will be provided with ABN of employer when they commence employment and can then complete necessary forms in their myGov account which will automatically populate the employers software as required.

 

Closely Held Employees

Reporting for closely held employees doesn’t start until 1/7/2020

A closely held payee is one who is not at arm’s length. This means they are directly related to the entity from which they receive payments for example:

  • family members of a family business
  • directors or shareholders of a company
  • beneficiaries of a trust

You will need to make reasonable estimates each quarter of the amounts paid to closely held payees. You can calculate these amounts using one of the following methods:

  • withdrawals taken by the payee (but do not include payments of dividends or payments which reduce liabilities owed by the business to the closely held payee)
  • calculating 25% of the total salary or Director fees from the previous year
  • vary the previous years’ amount (to take into account trading conditions) within 15% of the total salary or Directors fees for the current financial year.

These methods are similar to the way you would calculate pay as you go (PAYG) instalments.

From 1 July 2020 you will have the option to report closely held payees’ information quarterly through STP. This report will be due at the same time as your quarterly activity statement.

Software solutions

There are a range of software solutions available that will allow you comply with STP.

All the main software providers (MYOB, Xero, Phoenix, etc) will be offering an STP compliant payroll solution. There will also be other new providers who will enter the market to provide payroll solutions or systems for reporting STP. 

For employers with 5 or more employees, we recommend the MYOB Essentials or MYOB AccountRight Live range of products. If you are currently using just the accounting version of these packages, you can upgrade your software subscription to include a payroll module.

If you are already using MYOB AccountRight, you need to be on the latest version of the AccountRight Live to stay compliant. The older AccountRight Version 19 and prior will not be made compliant and it will no longer be supported by MYOB after September 2019

If you have 4 or fewer employees, there are a range of payroll only solutions available for $10 or less per month.

Contact us to discuss the best solution to make you STP compliant.

Clients with employees who have their bookkeeping completed by Christies will be contacted soon to discuss the likely changes that will be necessary to become STP compliant.

 

 

 

 

Penalty rates and the impact of change

The Fair Work Commission (FWC) has moved to cut Sunday and public holiday penalty rates.

The changes to penalty rates are not yet in force – see When will the changes take effect?

Flagged back in 2014, the review into penalty rates was part of the FWC’s four yearly review of all Modern Awards. Hearings, submissions and reviews have been ongoing since 2015. The outcome of that process (see AM2014/305 Penalty rates case) is to reduce Sunday and public holiday rates in the following Modern Awards:

• Hospitality Industry (General) Award 2010 [MA000009]
• Registered and Licensed Clubs Award 2010 [MA000058]
• Restaurant Industry Award 2010 [MA000119]
• Fast Food Industry Award 2010 [MA000003]
• General Retail Industry Award 2010 [MA000004]
• Hair and Beauty Industry Award 2010 [MA000005]
• Pharmacy Industry Award 2010 [MA000012]

When will the changes take effect?
The public holiday penalty rate reduction will come into effect from 1 July 2017 with the exception of the Clubs Award, which remains unchanged.

For the reduction in Sunday penalty rates, transitional measures will be put in place from 1 July 2017. The FWC has flagged that the reduction may be via a series of annual instalments so the full impact of the reduction will be graduated. The decision on how penalty rates will be reduced and over what time period won’t be known until May 2017.

Not everything is as simple as it seems with some penalty rate changes only impacting on employees at certain levels. For example, in the Fast Food Industry Award, Sunday penalty rates for Level 1 employees will decrease from 150% to 125% for full and part-time employees, and from 175% to 150% for casual employees. Level 2 and Level 3 employees are unaffected.

There are also some minor variations to the early/late night work loadings in the Restaurant and Fast Food Awards that will take effect in late March 2017. These variations don’t change the loading but do change the spread of hours; changing it from midnight to 7am to midnight to 6am.

It will be important for all employers affected by the Award changes to not only understand what Award their employees are covered by, but also at what level. While nothing needs to be done now, keep an eye out for the finalised Awards and other changes from May.

The SuperStream Deadline is Fast Approaching!

Small businesses with employees must be SuperStream compliant by 30th June 2016. With just 3 months before this deadline, the ATO have announced that to date, more than 60% of small businesses are already SuperStream compliant.

This means that if you aren’t already compliant, it’s important that you take steps now to become SuperStream compliant by the deadline.

SuperStream is the standardisation of how employers make superannuation payments on behalf of their employees. Under SuperStream, superannuation payments for your employees must be made electronically, in a standard format.

There are a variety of ways you can make compliant payments:

  • If you are using payroll software, your software provider will provide details on how to make SuperStream compliant payments using their software, so make sure your software is up to date.
  • Your default superannuation fund provider can act as a clearing house for your superannuation payments. Typically that will allow you to make one payment to your superannuation fund provider and they will distribute the money to other funds on behalf of your employees.
  • Use the ATO Clearing House. The ATO provides a free clearing house service for small business (under 19 employees or under $2 million turnover).  You can provide the ATO with the details of the employee payments you need to make via their online portal, do a bank transfer for the total amount, and the ATO will distribute the funds to the appropriate superannuation funds on your behalf.

There is some basic information you will need from your employees to set them up in any of these systems. You will need their Tax File Number, details of their superannuation fund and their member number, as well as the funds Unique Super Identifier number (USI) or fund ABN.

An employer checklist is available on the ATO website that provides more information on becoming SuperStream compliant.

If you have any questions about Superstream, or how to become compliant, please contact our office for further advice.