At the end of 2014 the government announced its Single Touch Payroll (STP) initiative with a promise that it will cut red tape for employers by simplifying tax and superannuation reporting obligations. The application is still about a year away, but STP builds on the ongoing initiatives to build and improve the current Standard Business Reporting products, and utilises the innovation of software developers to provide accounting software solutions that meet the needs of employers.
Pay-as-you-go withholding reporting automated
Under this online interactive tool, it is planned that employers will use accounting software every pay-run to automatically report payroll information to the Tax Office when employees are paid. This will eliminate the need for employers to report employee-related pay-as-you-go withholding (PAYGW) in their activity statements throughout the year Year-end employee payment summaries will go too.
Changes to TFN declarations and Super Choice forms
In addition, the announcement said the government will streamline tax file number declarations and Super Choice forms by providing digital services to simplify the process of bringing on new employees. Under STP, when a new employee commences they would have the option to supply their details electronically through the government portal myGov. The Tax Office says employee details data, like TFNs and addresses, can be pre-filled to minimise administrative legwork. Once filled out through myGov, employee details would be transferred directly to the employer (to be filed into STP software), the Tax Office and other government agencies like Centrelink. It’s hoped this process will make things easier for new employees and reduce delays in passing on super fund details and other vital information to employers.
The government entered consultation with the business community after the announcement (submissions now closed) and currently propose the following transition arrangements:
- Single Touch Payroll to be available from 1 July 2016
- Large employers (as yet undefined) to be using the system from 1 July 2017
- Everyone to be in the system from 1 July 2018.
The cash flow problem
In addition, consultation has examined the potential for employers to remit PAYGW and the Superannuation Guarantee at the same time employees are paid their salary and wages. In recognition of the potential impact to cashflow current indications are that instant payment of SGC and PAYG would only apply if the business opts in and for previously non-compliant businesses.
Employers will need cloud software that is both compatible with Standard Business Reporting requirements and able to build on SuperStream solutions. This means many businesses may need to upgrade or replace the software they currently use to prepare for STP’s. There are obvious costs to consider here, but it is expected these will be recouped long-term through time and resources saved in paperwork and processing.
In response to concerns from businesses who may not have satisfactory internet or cloud software systems the government has indicated that the system will allow exceptions where required. However, with many affordable and easy to use software providers embracing the transmission method, resulting in the real potential for better business processes, we encourage businesses who fear they may not be positioned to benefit from the implementation of STP to discuss your options with us.