If you’re a business owner, chances are you’ve already heard of Single Touch Payroll (STP). STP is a new regulation that changes when and how small businesses report their payroll activities to the Australian Tax Office (ATO).
Since the 1st of July 2019, The ATO requires employers to report any salaries and wages paid – plus PAYG withholding and superannuation information – regularly throughout the year using STP.
So what do you need to know about Single Touch Payroll? Read on to find out.
Need help with your company’s payroll? Pisani Group offers accounting services that take care of your company’s payroll to ensure your staff are paid correctly and on time. Contact us today to find out more about our services for small businesses.
What is Single Touch Payroll?
According to the ATO, “STP offers the ability to streamline your reporting to help you achieve efficiencies of real-time reporting and help with your compliance processes, compared to having a number of separate reporting processes.” In a nutshell? STP is a new way for employers to report tax and super information to the ATO every time they pay their employees.
Previously, only large employers with over 20 employees had to report through STP, while small businesses only needed to report their employees’ wages and superannuation to the ATO at the end of the financial year.
Benefits of STP
Streamline the reporting process
Until recently, businesses had to withhold money from an employee’s salary or wages and then submit their PAYG withholding on the monthly or reporting date. With STP, business owners can now submit payroll information such as salaries, allowances, deductions, PAYG and superannuation as they pay their employees.
Less room for error
STP allows the ATO to pre-fill Business Activity Statements (BAS) for employers. This reduces human error, avoids incurring penalties and saves money by not paying someone to do an accuracy check. Win-win!
No more payment summaries
Thanks to STP, payment summaries don’t need to be sent to employees anymore, so employers don’t need to produce them. The ATO uses STP reports to record any salary/wages paid, taxes collected, and superannuation contributed.
Employees can see the information that used to be on their payment summaries by logging on to MyGov.
Are there any risks with STP?
There aren’t any – unless the business is facing financial difficulty.
Because STP requires business owners to report all information regarding PAYG tax and superannuation payable every pay period, the ATO can now quickly determine who has unpaid debts and can take swift action.
Penalties from the ATO may include:
- Director Penalty Notices. These make business owners liable for the company’s PAYG Tax or superannuation
- Garnishee Notices. These are sent to the business’ bank account
- Forcing the company into liquidation.
What else does STP apply to?
STP doesn’t only apply to employees’ wages. Employers can also use STP to report:
- Remuneration to the director of a company
- Return-to-work payments to an individual
- Termination payments to employees
- Unused leave paid
- Parental leave pay
- Any payments to an employee under the Seasonal Labour Mobility Program
STP can also be used to report other non-mandatory details to the ATO, such as:
- Employer superannuation contributions
- Fringe benefit amounts for employees
- Payments made to contractors outside the payroll
STP Phase 2
STP Phase 2 comes into effect on the 1st of January, 2022. According to the ATO, Phase 2 will “reduce the reporting burden for employers who need to report information about their employees to multiple government agencies.”
In a nutshell, Phase 2 means that more information will need to be reported to the ATO, such as:
- Employment basis
- Paid leave
- Allowances
- Overtime
- Cessation details
- Child support deductions
- Salary sacrifice
- Lump sums
- Country codes.
Employers will also need to separately itemise the components which make up the gross amount – including bonuses, directors fees, paid leave, salary sacrifice, overtime and allowances.
Make STP easy with Xero
At Pisani Group, we use the latest and best software systems to manage every element of your small business bookkeeping needs, including payment of staff, taxes, superannuation, expenses and monitoring your cash flow.
One of the systems we use to make STP easy is Xero – an online cloud accounting tool that helps small businesses get paid faster. And the best part? You don’t need to be an accounting whizz to be able to use it. Any small business can use Xero – in fact, over 2 million subscribers worldwide do.
Xero allows employers to store their information on the cloud, which is accessible anytime, anywhere. It holds all data securely online and encrypts it using industry-standard data encryption. And due to its easy-to-use functions and layout, Xero is super user-friendly.
Why use Xero for STP?
STP is a piece of cake with Xero. With a touch of a button, employers can report employees’ wages each pay using Xero’s payroll software.
Not only can Xero generate and send reports showing employee PAYG withholdings and superannuation liabilities, but it can also do so much more – such as:
- Collating pay, PAYG and super details at every pay run
- Submit reports directly to the ATO in a few simple clicks
- Allow business owners to view the status of reports and see if they’re overdue, pending or sent.
Need help setting up Xero? We can help
Our team of experienced accountants can assist you import data from that system into Xero and continue where you left off.
Then we can help you gain the knowledge to use Xero to manage your business accounts. Our Xero training will set you up with a strong understanding and practical knowledge of Xero to advance your business.
Meeting all of your tax obligations can be a time-consuming process that stops business owners from managing and growing their businesses. Let a dedicated Pisani bookkeeper help you catch up today and help you stay on top of it. Contact us here to find out more.
