In case you missed it, single-touch payroll (STP) legislation was introduced into federal Parliament on 31 August 2016 through the government’s Budget Savings (Omnibus) Bill 2016. STP is yet another example of the digital-by-default journey we are on. It aims to cut red tape for employers by simplifying tax and super processes. Make no mistake it also aims to benefit the ATO by providing it with more data and in a more real-time manner. STP will initially involve just real-time information, and not real-time payment as was originally proposed.
STP should make the ATO’s task of tracking non-compliance of super a little easier as it increases the availability of real-time data. However, it does not ensure what is reported makes its way into an employee’s super account as there is a delay between reporting and payment. Employers are only required to pay superannuation once every four months and super payments are not always synchronised with payroll information.
Similarly, employees will have greater visibility of the information via their myGov account. It is the policy intent that myGov will also include employer superannuation payment information, that is, Super Stream, improving transparency around when the accrued superannuation entitlements are actually paid.
The government has committed extensive trials to this sector to prove the business case before it makes any announcement on whether the sector is brought into the STP reporting regime. It needs to ensure it is not adding to the administrative compliance burden on small business operators who employ people.
What is STP?
STP aims to align employer reporting of pay-as-you-go withholding and superannuation contributions to an employer’s payroll processes. Entities that report under STP are able to obtain relief from obligations to provide payment summaries to individuals and a payment summary annual report to the commissioner of taxation. The data that is reported will be year-to-date information, so any adjustments to previously submitted information for normal payroll adjustments will be incorporated into any new data provided. STP will also have flexibility by allowing employers the opportunity to adjust previous year’s data after year end to reflect changes to previously submitted data. The system has been designed to ensure payroll data will be the source of truth for STP reporting purposes.
Who is initially caught by STP reporting?
You will need to commence reporting under STP from 1 July 2018 if you are a ‘substantial employer’ on 1 April 2018. A substantial employer is an entity that has 20 or more employees, or you are a member of a wholly-owned group and the group has 20 or more employees in total.
To determine if you are a substantial employer, you only need to count individuals who are your employees as defined under the ordinary (common law) meaning of ‘employee’.
This means contractors and other individuals who are employees under the extended meaning of ‘employee’ in the Superannuation Guarantee (Administration) Act 1992 are excluded from the headcount if they do not meet the ordinary meaning of employee.
As headcount is to be used to determine the number of employees, your employee’s full-time equivalency, the casual nature of their employment or the fact they work overseas will not be relevant.
If you have 20 or more employees on 1 April in a later year, you will start reporting under STP from the next 1 July. This means you will have a minimum of three months to organise your systems and procedures in order to commence reporting under STP from 1 July of that year.
Once you become a substantial employer, you must continue to report under STP, even though you may no longer have 20 or more employees, unless the commissioner grants you an exemption.
Employers with less than 19 employees are excluded from the initial rollout of STP reporting. The ATO is conducting a series of pilots with a broad range of smaller employers, solution providers and tax practitioners to better understand the impacts and benefits of implementing STP.
We believe there is merit in taking advantage of technology to streamline processes. As a country we have adapted, grown and greatly improved by embracing proven and secure digital technologies. While digital security needs to always be at the forefront of any new data initiatives, it is hard to imagine a business system in five or 10 years’ time that hasn’t further evolved and become more efficient from the practices of today.