Single Touch Payroll Updates You Should Know AboutStuart Taverner
As a small business owner, the end of financial year is a timely reminder that you have more than just the operations of your business to keep on top of – and Single Touch Payroll (STP) is one of them. At its core, STP aims to reduce the reporting burden that employers have towards the government agencies. If you’re a small business owner with employees, you’re probably familiar with it already: with STP, you would be reporting the payroll information (i.e. salaries and wages, pay as you go (PAYG) withholding, and superannuation) of your employees each time you pay them, through STP-enabled software.
Unless your business only has closely held payees, or are covered by a deferral or exemption outlined by the Australian Taxation Office (ATO), you should be reporting through STP now. But from Thursday 1 July, changes to STP reporting will come into effect that will mean quarterly reporting for micro employers, and changes to reporting obligations for small employers with closely held payees. Read on to find out how this may affect you.
You’re an employer that only has closely held payees
A ‘closely held payee’ is someone directly related to your business. For example, your family members, if it’s a family business; directors or shareholders of the company; and beneficiaries of a trust. From 1 July, you must now report your closely held payees through STP. If you’re a small employer with less than 20 employees, this can be done at varying times, which you can choose from depending on your business circumstances.
- Reporting actual payments on or before the date of payment: This method is quite straightforward to keep track of. Whenever you make a payment to a closely held payee, you simply report the information at the time (or before) the payment is made.
- Reporting actual payments quarterly: Reporting quarterly means you’ll be reporting less often than the previous option, but you’ll want to ensure your record-keeping is up to scratch. When your business activity statement is due each quarter, you’ll need to report all payments that have been made in that quarter.
- Reporting a reasonable estimate quarterly: This option requires reporting amounts quarterly that are equal to, or greater than, a percentage of the gross payments and amount of tax that was withheld from the latest year. To do this, you’ll need to calculate an estimate based on all of your circumstances.
It is generally considered acceptable to report a year-to-date amount in STP that is equal to 25% of the total amount reported in that previous year (in Quarter 1), 50% in Quarter 2; 75% in Quarter 3; and 100% in Quarter 4. If circumstances have materially changed, this estimate will need to be adjusted to reflect your circumstances – and if the estimate is lower than that of the most recently finalised declaration you made, the ATO might contact you to find out why.
This recent webinar from the ATO provides useful information in regards to closely held payees.
If you have any other payees (sometimes referred to as ‘arm’s length employees’) they must be reported on, either on or before each time they are paid. And, if you have 20 or more payees, different arrangements apply.
You’re a micro employer
You’re a ‘micro employer’ if you have one to four employees. In the past, there’s been a concession for micro employers – in other words, micro employers didn’t need to report STP – but the changes on 1 July mean they’ll need to, unless exceptional circumstances exist.
Now, if you’re a micro employer, you’ll need to lodge quarterly STP reports through STP-enabled software. Please note that this is a different obligation to the activity statement, which must be lodged separately.
Be ready for Phase 2
STP Phase 2 is being rolled out from January 1, 2022. Are you ready for the increased reporting requirements with every pay run? Find out how Cashflow Manager’s software can help you stay compliant.