Last year, you would have thought Single Touch Payroll was a new passing phase, but now the payroll process change is a fact for businesses and compliance is not an option. While the overall result of Single Touch Payroll will mean more transparency for employees and time saving for employers, it will be a jarring change initially for those who have been operating under a routine payroll process for decades. If you’re an SME (small to medium enterprise) and unsure of how exactly these changes will impact you and your business, let’s review what the changes are and what they mean for your business.
What is Single Touch Payroll?
Single Touch Payroll was introduced in 2018. It requires that all employers report their employees’ wages, salaries, pay as you go (PAYG) withholding and super contributions. This reporting must be done when employees are paid, whether that is weekly, fortnightly or monthly. For businesses to be Single Touch Payroll compliant, they must have changed over in July of 2019, or 2018 for businesses with 20 employees or less. Given that all businesses have different capabilities, the ATO has many resources that will ensure a smooth transition to Single Touch Payroll, including what sort of stp software is required.
How do SME’s report?
Single Touch Payroll has increased the reporting requirements, which means that many businesses will need to bring in a modern payroll software solution. For those businesses already operating just that, there will be upgrades needed to facilitate the reporting function. For those who conduct payroll through their own means, they will need to integrate a payroll software solution to their processes. Acknowledging that this is not an easy change for some business models, the ATO has provided a list of no-cost and low cost payroll software solutions so that operators can remain compliant without having to outlay a large spend.
Are there any exceptions to Single Touch Payroll?
Single Touch Payroll is a blanket policy, ensuring that all employees will have the same experience and transparency no matter which employer they work for. There is, however, more flexibility with some business types. ‘Closely held payees’ do not need to be reported on as regularly as employees, because they are often paid at different intervals. A closely held payee is an individual who is a direct family member of the business operator, trustee, board member, director, or beneficiary. If your business employs some closely held payees, reach out to the ATO to understand what is required and what can be agreed upon with reporting compliantly with Single Touch Payroll.
What are the next steps?
From here, businesses will need to have made the change to Single Touch Payroll and commence reporting at each payment period. Employers should also communicate this change to their employees from full-timers to casuals, who will not be plugged into the changes and maybe expecting tax period to play out as it previously has. Payment summaries will no longer be issued to staff, as they can simply access their tax and super contributions in real-time through myGov. Before you choose a software payroll system, shop around to see what is out there and understand what is recommended for a business size and format like yours.
Like any change you have seen in your small to medium business, there is a greater chance of success if everyone is on board. Accountability and transparency go hand in hand. Have an open dialogue with your payroll and finance team so that they know the responsibility is shared, and there are no surprises the first time you have to report.
