What and why is Single Touch Payroll Reporting?
Single Touch Payroll is a reporting change for employers. It means employers will report payments such as salaries and wages, pay as you go withholding (PAYGW) and super information to us directly from their payroll solution at the same time they pay their employees. For employers with 20 or more employees, Single Touch Payroll reporting starts from 1 July 2018.
The Australian Government has announced it will expand Single Touch Payroll to include employers with 19 or less employees from 1 July 2019. However, they can voluntarily report under STPR before this date.
Do I have to use Single Touch Payroll Reporting?
As stated, Single Touch Payroll Reporting will have to be used in cases where there are 20 or more employees. A headcount needs to be taken on 1 April, 2018, to find out if the employer is classed as a “substantial employer”.
The following employees need to be included within the headcount:
- Full-time employees
- Part-time employees
- Casual employees who are on your payroll on 1 April and worked any time during March
- Employees based overseas
- Any employee absent or on leave (paid or unpaid)
- Seasonal employees (staff who are engaged short term to meet a regular peak workload. The example the ATO gives is harvest workers.
When performing the headcount, the following are not included:
- Any employees who ceased work before 1 April
- Casual employees who did not work in March
- Independent contractors
- Staff provided by a third-party labour hire organisation
- Company directors
- Office holders
- Religious practitioners
How does Single Touch Payroll affect other reporting requirements?
An employer that has met its Single Touch Payroll reporting obligations for an income year will not need to comply with the following obligations:
- Notification of withholding amounts
- Annual payment summaries
- Payment summaries for payments for termination of employment
- Annual reports to the Commissioner; and
- Part-year payment summaries.
No more payment summaries?
The ATO will be able to make the information currently recorded on an annual payment summary progressively available throughout the income year to employees on ATO Online.
The ATO will use the information collected through STP reporting to pre-fill employees’ income tax returns.
Employers may still choose to provide an annual payment summary if requested to do so by an employee.
Employers must provide payment summaries in relation to amounts that are not reported through STP. These include reportable employer superannuation contribution (RESC) and reportable fringe benefit (RFB) amounts. It is not mandatory to report these amounts through STP. However if an employer chooses to report them by 14 July, it would not need to provide an annual payment summary covering these amounts.
Example (from consultation paper): Relief of current obligations for amounts reported under STP
Throughout the 2019-20 financial year, Sue, a substantial employer, made payments to her employees that she reported through STP. Sue also withheld amounts from payments she made to individuals in accordance with voluntary agreements she had with those individuals (section 12-55).
On 12 July 2020, Sue reports to the Commissioner reportable employer superannuation contributions (RESC) and reportable fringe benefits (RFB) amounts for her employees under STP; and makes a declaration to the Commissioner to finalise her STP reporting for the 2019-20 financial year.
Sue does not need to give her employees payment summaries or the Commissioner a payment summary annual report in relation to payments reported through STP or her employees’ RESC and RFB amounts. Sue will continue to be required to give payment summaries to individuals, for whom she withheld amounts under voluntary agreements, and the Commissioner a payment summary annual report to cover these amounts.
Payment of PAYGW liabilities
The new law has not changed due dates for payment of PAYGW liabilities. However, to further align reporting and payment of PAYGW to payroll processes, there will be an option to pay at the same time as lodging STP reports. For most employers, the due date of PAYGW liabilities is aligned to their BAS due date.
Are there penalties for non-compliance?
The established administrative penalty regime will apply where an employer does not comply with STP requirements – for example, failure to lodge an STP report, and including false or misleading statements in an STP report. However, the STP legislation provides for specific types of penalty relief.
Transitional relief for failure to lodge
As a transitional measure, employers will not be subject to administrative penalties for the first 12 months, unless the Commissioner has previously issued a warning notice in relation to an earlier missed STP report.
The ATO anticipates that warning notices will be rare in the first 12 months of STP reporting. In the first instance, it will make contact to provide support to help in the transition.
The Commissioner will not set a minimum number of late lodgements before a warning notice is given. The Commissioner will only give a warning notice where it is considered appropriate, having regard to an employer’s circumstances and behaviour.
Grace period for correcting false or misleading statements
The law allows the Commissioner to provide an ongoing grace period for correcting false or misleading statements in relation to STP reports without penalty.
The Commissioner has discretionary power in relation to the following:
- how the corrections are made – for example, in a subsequent STP report
- determining, by legislative instrument, the timeframe for reporting entities to correct errors and specify that different timeframes may apply to different classes of entities (eg. depending on size of withholder and size of correction)
- determining a different period for a particular entity – for example, reducing the grace period if it appears the entity is misusing the grace period.
Are there any exemptions from STP reporting?
The law gives the Commissioner the power to grant a substantial employer an exemption from STP reporting. An exemption may be made on a class of entity basis or on an individual basis. An entity that receives an exemption will still have to report under the current obligations. The exemption may be limited – for example, the entity may be exempt from reporting only in relation to specific items (eg. superannuation) or in relation to only part of a year.
Individual employer exemption
The Commissioner may, in writing, exempt a particular entity from reporting under STP for one or more income years. The Commissioner may make an exemption on his own initiative or on application by an entity.
The ATO will consult on the circumstances under which an individual exemption may be granted. For example, the Commissioner may provide an exemption to an employer that becomes a substantial employer on 1 April as a result of temporarily employing 20 or more individuals (eg. during the harvest period of an agricultural employer).
The Commissioner will not unreasonably refuse an application. However, the Commissioner is unlikely to grant an exemption to a substantial employer that is likely to continue to employ at least 20 people and has the capacity to report under STP. In such cases, a temporary exemption or a limited exemption may be granted instead.
The Commissioner may, by legislative instrument, exempt a class of entities from reporting under STP for one or more income years.
The ATO will consult on the circumstances under which a class exemption will be provided. For example, the Commissioner will have regard to the common circumstances in which people may find it difficult to report electronically. These include:
- remote locations where there is no or unreliable internet connection
- cultural or religious reasons
- impacts of a natural disaster.
Example (from the EM)
Assume that the Commissioner grants an exemption on a class basis for all substantial employers operating in remote locations where there is no or unreliable internet connection. Anne operates a grocery store where she employs 25 employees in a remote location covered by the Commissioner’s exemption. Whilst Anne is a substantial employer, she would not have to report under STP. Anne would not need to apply to the Commissioner for an exemption, as her business is covered by the class exemption.
However, Anne would be subject to her existing obligations to report in accordance with Subdivision 16-C. This means she will continue to report her PAYG withholding liability using her current process, give payment summaries to her employees and give a payment summary annual report to the Commissioner.
How will STP streamline employee commencement procedures?
ATO Online will include a streamlined employee commencement service. The service will enable a person commencing a new job to make their TFN declaration and superannuation fund choice online directly. This will reduce an employer’s paperwork, compliance costs and errors associated with re-keying information when they take on a new employee. If the employee has used ATO Online to input the details, the ATO will be able to provide this information directly to the employer on the employee’s behalf using SBR-enabled software.
It is not compulsory for employees and employers to use this service. Existing services for TFN declarations and choice of superannuation fund will continue to be available. Existing employees may also use ATO Online to make a new TFN declaration or choose another superannuation fund.
If an employee makes a TFN declaration using ATO Online, and the employer retrieves this information electronically, the employer will not need to counter-sign the TFN declaration and send it to the ATO, as currently required. If the employer retrieves an employee’s TFN with PAYGW information within 14 days of the employee starting employment, the employer will not need to notify the ATO of the new employment arrangements, as currently required.
These existing obligations will continue to remain with the employer:
- to disclose an employee’s TFN to a superannuation fund; and
- to notify the ATO if an employee chooses not to provide their TFN.
Example (from consultation paper)
On 12 July 2017, Lauren gains employment with Pettary Hire Co. During induction, Pettary Hire Co’s Human Resources manager, Nathan, informs Lauren that if she has a myGov account she can make a TFN declaration using ATO Online. On 13 July, Lauren accesses ATO Online and makes a TFN declaration in relation to Pettary Hire Co. On 14 July, Pettary Hire Co retrieves Lauren’s TFN declaration and PAYGW information using SBR-enabled software. Pettary Hire Co must keep a record of this information and on-disclose Lauren’s TFN to her superannuation fund if it makes superannuation contributions for her. Pettary Hire Co is not required to sign and return Lauren’s TFN declaration to the Commissioner.
Choice of superannuation fund
An employee may make a valid choice of superannuation fund by providing the relevant information on ATO Online. The employer will be able to retrieve this information through SBR-enabled software. It is not compulsory to make a superannuation fund choice online. The current process, where an employee gives a completed standard choice form to the employer, will remain available.
Example (from EM)
Ross is an employee of John Building Co and in May 2017 chooses Andrew Industry Super Fund as his superannuation fund for employer contributions via the Commissioner’s online service. On 1 June 2017, the Commissioner gives John Building Co notice of Ross’ choice of fund information. Andrew Industry Super Fund becomes Ross’ chosen fund for contributions by John Building Co on 1 August 2017 or at an earlier time determined by John Building Co.