From 1/7/18 Single Touch Payroll became mandatory for employers with more than 20 employees (although Xero and MYOB users have until 31/12/18 to comply). This will apply to all employers from 1/7/19 and result in an increased compliance burden and cost.
What is Single Touch Payroll?
Under Single Touch Payroll, employers will be required to report their payroll information to the ATO electronically for each pay run. This will require the employer to utilise Single Touch Payroll compliant software to report to the ATO on or before each pay date. As this information is being reported each pay period, end of year PAYG Summaries will no longer be required. The information will also be used to pre-fill your Business Activity Statement for wages and PAYG Withholding. There is no change to the timing of payments, just the reporting of them.
What do I need to do to comply?
There are a few options for employers and they all involve an additional cost if you aren't already paying for compliant software.
Option 1 - Use a complying accounting software to account for all of your transactions including payroll
This would involve using a software provider such as Xero or MYOB for your accounting. In the case of MYOB, if you are on an old desktop version you will need to upgrade to lodge Single Touch Payroll information. MYOB Version 19 or earlier will not be Single Touch Payroll enabled. If you are using Xero, you may need to upgrade if you don't currently use invoicing or payroll.
Benefits - The benefits of using this option is that your accounting should be more efficient (through the use of bank feeds) and your tax and super calculation will be made automatically by the software (assuming that you have selected the right options).
Disadvantages - If you are not already using a Single Touch Payroll compliant software, or paying an annual subscription for an old MYOB product, the additional costs will generally be around $50 per month depending on what you are currently spending and how many employees you have.
Option 2 - Use a lesser known payroll software provider
There are many providers, mostly new that are offering Single Touch payroll compliant software at a significantly reduced cost (eg 10c per employee, per pay run). These providers will likely require you to fill in a spreadsheet with all the required fields and lodge it through them each pay period.
Benefits - Low cost!
Disadvantages - As these companies are less well known, their reputation may not be proven. You need to be comfortable that your data is going to be secure and lodged appropriately. It will also be more complicated to lodge as you will need to calculate tax and super requirements (unless you are using an old accounting software to calculate this) and enter the information manually each pay period.
Option 3 - Outsource your payroll to a payroll service provider
The final option is to forget about managing your own payroll and to outsource it to a third party provider. These providers should know industrial relations laws well and therefore know the rates you should be paying. They will take care of all the reporting to the ATO.
Benefits - Your payroll is being processed by professionals who understand the requirements and can assist you with tricky payroll issues.
Disadvantages - This would be the highest cost option.
What happens if I make an error?
You will still be able to correct errors but it will be more difficult than before. Errors may also heighten the risk of audit activity from the ATO.
What will the ATO do with the information provided?
The ATO will now have all wage and super information reported to them in real time. They will be able to match this information to easily identify employers who are not meeting their superannuation obligations on time. It will therefore be critical to ensure you are paying your super obligations by the due date or significant penalties are much more likely to apply. The ATO have also said they will use this information to match where employees are claiming more than one tax free threshold. In future the ATO may use the data to identify where employers are not withholding enough from their employees wages making the correct calculation of this more important.
The information reported to the ATO will be made available to employees in real time through their myGov account.