If you are a small business owner that has fewer than twenty employees, it is essential that you fully understand the new single touch payroll (STP) legislation. Brought into practice last year for larger businesses, this new system will be mandatory for all Australian businesses as of July 1st of this year.
Do not panic if you have not yet fully prepared yourself for the coming changes as you still have some time before the new reporting standards are required. However, it’s important that you take the time to fully understand your obligations to ensure that you meet all of the requirements. Getting on board with STP does not need to be a huge project for you and your team, especially if you take the time to prepare for the changes in advance.
Continue reading to learn about what exactly is changing and what will be required under single touch payroll.
What Is Single Touch Payroll?
Australian legislation introduced in the last year now requires that employers report salaries, wages, PAYG withholding and superannuation on a more frequent basis. Under the new single touch payroll plan, this is to be done electronically for each pay period directly to the Australian Tax Office (ATO). Whenever you pay your employees, you must send the ATO your data using payroll software. Fortunately, up-to-date payroll software in Australia has been configured for this purpose but be sure to check with your provider to be sure your system is compliant.
Why Are These Changes Necessary?
While any administrative change entails additional costs and time to adjust to for small businesses, there are several valid reasons why the single touch payroll system has emerged. First and foremost, the ATO will now be equipped with more up-to-date information on payroll throughout the country. This will assist in the evaluation of various social policies and will ensure enhanced compliance with the Australian tax code.
Another benefit is that your employees will now be able to access their payroll and tax information online. This added convenience brings the Australian tax system into the digital age.
What Do I Need To Do To Prepare?
As a small business owner, you should begin preparing for the single touch payroll system immediately. The most important step you should take is to read through the requirements of this legislation and understand the implications for your business. Updating your payroll software to the most current version, which should include provisions to comply with the new legislation, is a great first step.
If you do not use payroll software, you do have the option of using a registered tax agent to report through STP on your behalf. This may be a less convenient method, but if you are wary of using payroll software for whatever reason then there is space to continue using alternative means. However, for most small businesses, utilising payroll software is definitely the most straightforward way to ensure you are compliant with the new regulations.
Make sure that your staff, especially the payroll and accounting teams, fully understand the reporting requirements of STP. It’s important that you train all relevant staff members on how to use the updated payroll software, as your employees should not be expected to go it alone.
Finally, to make sure that there are no hiccups when July 1st rolls around, assess your current payroll practices and make sure that your information is up-to-date. This includes ensuring that your current employee details are accurate.
Start Now To Avoid Problems
While the deadline for single touch payroll implementation is looming for small businesses, you are fortunate that you can learn from the experience of larger companies who are already required to use this system. Be sure that you are familiar with both the new forms and reporting expectations before July 1st to ensure your company is compliant. If you start preparing now, it will help you to avoid a chaotic transition in the coming weeks.
