STP for Microbusinesses and SMEs – what does it all mean?
Legislation extending Single Touch Payroll (STP) to all Australian employers from 1 July 2019 has now passed parliament. That means all employers – from 1 employee up – must now report using STP.
Not sure what STP means, or how this change will impact you? We’ve been doing STP for years now – here’s all the key info you need to know.
What is STP?
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. In the case of microbusinesses, there are options to report STP less frequently – for example, quarterly via your Accountant if you don’t have STP-enabled software.
Do I need new software?
Now that the legislation has passed, a rush of software solutions have hit the market offering STP-enabled tools for pretty cheap.
Most software packages with payroll processing features will be STP-enabled by now. If you are using software that is not STP-enabled, you should consider changing, or at least ask when the vendor plans to be STP-compliant.
If you’re not using software now to process payroll – for example, you’re a microbusiness – you don’t need to start. You can continue to pay and report via your accountant. However, new microbusiness-specific STP-compliant software packages offering entry-level payroll tools for very small businesses have been launched in the last few weeks to coincide with the STP legislation change.
Most of these packages are $10-a-month or less and provide great starter functionality for businesses who have never used finance or payroll management tools. In addition to being STP-compliant, they can streamline other business processing such as invoicing or accounts management, which could help your business to be more efficient.
What will change after 1 July 2019?
Not much. Ideally, if you are using software yourself or processing employee payments via your accountant, there will be no change at all – your software or accountant should take care of it. You should still contact them to check, just in case.
One key consideration is – STP is real-time reporting to the ATO, who will now have a greater degree of visibility over your compliance with your ATO obligations. If you are behind in PAYG or superannuation payments, you can expect the ATO to catch up with you much more quickly. You should make every effort to comply, or at least contact the ATO – your proactivity may work in your favour.
What happens if I can’t/won’t be STP-compliant?
The ATO provides a transition period during which businesses are given the opportunity to become STP-compliant without penalties for non-compliance.
However, outside the transition period, if you haven’t proactively contacted the ATO about your STP status and don’t comply – you’ll potentially be hit with a compliance penalty.
Will other legislation changes like this happen in the future?
The short answer is – yes. The entire Australian government – and in fact, the world – is in the midst of a massive digital transformation which is pushing more and more transactional data exchange electronic. In the future, you can expect to report more to the various government agencies, via a greater number of channels, electronically.
Even STP will undergo additional changes after its inception, with the ATO already planning to roll-out changes to employee onboarding and offloading processes, and superannuation.
I’m not sure I can keep up with everything. What options do I have?
It’s increasingly clear that despite the best intentions of all agencies and businesses involved, digital transformation will place additional burden on all Australian businesses. The cost and expertise involved in accurately reporting data to government agencies in real-time, with the type of data being collected expanding all the time, will quickly become difficult for micro and small businesses.
If you aren’t an expert in managing payroll and compliance, you’ll either need to become one, employ one, or outsource to one. Seeing as becoming one is probably not realistic, and employing one can be expensive, your best option is to outsource – either to a managed payroll supplier or a good accountant offering payroll, reporting and compliance supported by up-to-date advice.
Outsourcing to a managed payroll supplier is a great option for small businesses – Aurion offers a fully-managed payroll service including all processing, reporting and compliance activities for a fixed-price per payslip, as do many others supporting different industries and employer sizes. Microbusinesses are better off with the accountant option – a good accountant can provide all of the above, as well as financial and business services to support you as you grow.
No matter what way you go, make sure to check with any prospective suppliers about how they plan to stay up-to-date with legislative changes.