If you switched to SingleTouch Payroll before the end of the financial year, there are a few new changes to be aware of. The way you now report the tax and super information for your employees have now changed.
Single Touch Payroll (STP) is available through most payroll, business management and accounting software, such as Xero. There are a number of different STP options for various businesses of all sizes. Even micro-businesses (those with less than four employees) can access affordable no-cost or low-cost STP options.
How does STP work?
Before STP, as an employee, you would report to the Australian Tax Office (ATO) all of your staff wages/income, superannuation and tax amounts after the financial year is complete (once per year). With the introduction of STP, this has changed so that employers are reporting to the ATO every time an employee is paid.
When you first start with STP, you will complete your payroll, pay employees and provide them with a payslip as per usual. Your pay cycle can continue as normal, too. When completing these tasks, your software will also send a report through to the ATO to provide details such as wages, pay as you go (PAYG) withholding and superannuation details.
How does STP change things at tax time?
As an employee, you used to have to provide your staff with a payment summary at the end of the financial year. This is no longer the case. Because you are reporting to the ATO pay, tax and super details each pay run, the ATO already has the majority of this information at any given time.
When you opt into STP, you instead provide an STP finalisation report via your payroll or accounting software. This then sends an end-of-year income statement to your employees via their MyGov account.
What should I tell my employees?
Your employees may not be aware of Single Touch Payroll, so may not realise they will no longer receive a payment summary in order to complete their tax return. You will need to inform your staff of these changes to ensure they understand how to complete their return this year.
Your employees will have an ‘income statement’ in their MyGov account at the end of the financial year. Their year-to-date payment information and superannuation details are all accessible throughout the year.
Most employers have until July 31, 2019, to complete their STP finalisation report. This is completed via your payroll/accounting software and is often referred to as an end-of-year report. In Xero, you can see how to complete this here. This means your employees should wait until after this date to complete their tax return, to allow enough time for reports to be sent through to the ATO.
After July 1, your employees should receive a message via their MyGov account to inform them that their income statement is “tax ready”, so they can then proceed to complete their tax return for the 2018-2019 financial year. Most information from other sources such as government agencies, health funds, banks and much more is usually pre-filled by mid-August.
What if my employees use a tax agent?
The ATO will send all of the appropriate information to registered tax agents in order to complete your employees’ tax returns. Tax agents will receive a direct link to information so that they are fully prepared to lodge their tax return. If any member of staff is utilising a tax agent, they will not need to do anything further to ensure their tax return can be completed.
What if my business did not opt-in to Single Touch Payroll?
If you did not opt-in to STP before June 30, you will still need to provide your employees with a payment summary at the end of the financial year (as you have done in the past).
If you need more time to get organised for STP for your business, you may need to apply for an extension. If you are an employer with 19 or fewer employees, you will need to opt-in to STP before 30 September 2019. If you won’t be ready by this time, you will need to apply for a deferral.
If you have closely held payees, your reporting won’t be necessary until 1 July 2020. An automatic grant for this exemption would already be in place. You can find out more about STP for closely held payers here.
If you are an employer with 20 or more employees, you should already be reporting with STP. Otherwise, you should already have a deferral in place.
What if I need more help?
If you need more guidance and information about Single Touch Payroll for your business, you can see more information at the ATO website here. Alternatively, having a chat with your registered tax agent or BAS agent is a good place to start.
If you need assistance with Single Touch Payroll, have a chat with Diverse Business Consultants today.