What is Single Touch Payroll?
Single Touch Payroll (STP) is a change in how the Australian Government required employers to report payroll information to the Australian Taxation Office (ATO) to make reporting easier across government agencies. Businesses with over 20 employees started reporting via STP on 1 July 2018, while companies with 19 or below employees commenced on 1 July 2019.
With STP, payroll information such as salaries and wages, pay as you go (PAYG) withholding and superannuation are sent immediately to ATO through STP-enabled software. There would be no need for annual payment summaries since businesses submit reports at every pay. By the end of the financial year, employers need to ensure that the information is finalised and complete so that the ATO can include this in the individual’s tax return.
STP also means employees need not wait for employers to provide payment summaries since they may now access all relevant payment information through the myGov portal.
How are STP data reported?
There are several options to submit STP data:
- Using a payroll or accounting solution that is STP-enabled
- For micro-employers (1-4 employees), there are no-cost or low-cost solutions available
- Third-party reporting, through a registered tax or BAS agent or a payroll service provider using STP-enabled software.
Depending on the employer’s situation, they can request to defer STP compliance with the ATO for more time before they start reporting, get an exemption for certain employees from certain payments, or apply for other exemptions.
Businesses may stop submitting STP reports if they no longer have employees, have ceased trading, have changed their structure, are not paying employees for the rest of the year, or have paused due to COVID-19. For these situations, the ATO has provided guidelines to allow the business to cease reporting.
What is its impact on the business?
Digitising processes streamlines payroll tax reporting for businesses. Before STP, the ATO does not see any payroll data until the end of the fiscal year. By obtaining information more frequently, the Commissioner will respond to, or take action against, any non-compliance closer to real-time than is currently possible. This includes people claiming general exemption at more than one job or people paying unusual amounts of tax without specific orders to do so.
The ATO could also share information with other Government Departments to ensure everyone is paying and receiving their correct obligations and entitlements.
STP Phase 2
The second phase of Single Touch Payroll is all about streamlining the reports to make it easier for employers to provide specific pay details to their employees. STP Phase 2 introduces new data type reporting, such as Country Income, Salary Sacrifice, Bonuses and Commissions, Overtime, Directors’ Fees, Paid Leaves and Deductions.
These report enhancements support the Whole-of-Government approach, where various government agencies besides the ATO can request access to payroll data for their processes. The first agencies to get access are the Child Support Agency (CSA), Department of Social Services (DSS), Department of Human Services (DHS) and Department of Veteran Affairs (DVA), with child support payments to be included in STP reporting.
STP Phase 2 commences by 1 January 2022.