At the recent Australia Business Software Industry Association (ABSIA) Forum, the Australia Taxation Office (ATO) provided an update about Single Touch Payroll (STP) for industry, including an update on discussions with industry working groups and their progress towards a pilot program phase.
What is Single Touch Payroll?
The Budget Savings (Omnibus) Bill 2016 – Single Touch Payroll reporting was introduced into Parliament on 31 August 2016.
Single Touch Payroll (STP) is an ATO reporting initiative designed to provide simpler, lower cost options for reporting payroll activity. The STP initiative delivers a new reporting standard to streamline existing PAYG, Superannuation and Tax reporting, which the ATO hopes will reduce costs and complexity while providing greater visibility of non-compliance so the ATO can assist/intervene for employers.
STP requires that when employers pay their staff, the employees’ salary or wages and PAYG withholding amounts are automatically reported to the ATO as part of payroll processing. Employers will also have the option to pay their PAYG withholding at the same time they pay their staff, though this is not mandatory.
There will also be some changes to how superannuation is reported to the ATO, alongside SuperStream reporting. There will be no changes to the way employers pay their superannuation; however, when those payments are made to their employees’ funds, the information will be automatically reported.
Under STP legislation, employers with 20 employees or more will be able to start reporting to the ATO through Single Touch Payroll from 1 July 2017. Reporting becomes mandatory after the 12-month transitional period finishing 1 July 2018.
Though STP is aimed at employers with over 20 employees, employers with fewer employees can still report voluntarily, although this is not a requirement. STP for small business is still under review.
What does Single Touch Payroll mean for employers?
Under STP requirements, all employers with 20 or more employees as at 1 April 2018 will be required to provide STP reporting. Employee numbers are subsequently reviewed annually on 1 April. Additionally, where their employee numbers reduce below 20, an employer is still obliged to provide STP reporting unless granted an exemption by the ATO Commissioner, or until such time as their employee numbers are reviewed.
The ATO has also advised that Commissioner exemption may also be granted for specific circumstances. Industry consultation about the type of circumstances that would lead to an exemption is currently ongoing.
What does Single Touch Payroll mean for payroll providers?
The introduction of STP means that payroll software providers will need to develop new reporting outputs and tools to produce STP reporting as part of pay run processing. STP reports need to be distributed to the ATO electronically using the standardised STP ebMS3 protocol.
For employers, this will mean extra processing steps when processing payroll. However, the design and intent of STP aim to leverage existing business processes; employers are simply adding additional steps to an existing process, rather than adding a new reporting process and associated overhead. Additionally, with the introduction of STP, the ATO envisages that reporting processing overheads in other areas, such as Business Activity (BAS) reporting and other PAYG and Superannuation management activities, should be reduced.
STP data will include year-to-date figures from your employer payroll data, including
- Salary and wage
- Tax withheld
- SGC amount
- OTE amounts
When transmitted to the ATO, the electronic data will be matched against existing employee/employer records. Where there is a match, the data will be loaded against the appropriate employee/employer accounts, and the employee/employer will be able to view the data via the MyGov portal.
Where data is unmatched, a secondary validation will occur, and in the event that data cannot be matched, it will be returned to the employer for troubleshooting.
Rolling out Single Touch Payroll reporting
The ATO has consulted heavily with industry to ensure customer requirements are clearly understood. The consultation phase is still ongoing, and Aurion have been actively involved in STP Working Groups to represent customer needs and typical requirements.
STP Advisory Groups have adopted a strategic, tactical and informative approach. The ATO and working parties join in co-design, collaborative and consultative forums, and these activities will continue through September, October and November as the ATO heads to pilot rollouts of STP towards the end of 2016.
At full inception, it’s expected that the ATO STP ebMS gateway will need to accommodate an estimated 600,000,000 pay event reports each year. Subsequently,
the ATO is conducting pilot activities across the following user groups:
- ATO Pilot
- Solution Provider Pilot
- Tax Practitioner Pilot
As the consultation and pilot activities continue, Aurion will provide regular updates about ATO and industry progress.
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