Single Touch Payroll Update
The ATO has reminded employers that legislation has been passed to extend Single Touch Payroll ('STP') to include all employers from 1 July 2019.
This will be a gradual start, and not all employers will start reporting at the same time.
NTAA: STP initially only applied to employers with 20 or more employees. Most software providers are offering STPenabled products, although some providers have asked the ATO for a later start date (a deferral) for their employer clients to report through STP, so it may be worthwhile checking with the relevant provider.
Employers with 5 to 19 employees ('small employers')
Small employers can determine when they need to start reporting from one of the following options.
Start reporting early – If an employer uses payroll software which offers STP, they can update their product and start reporting any time. The ATO recommends such employers talk to their software provider, or visit their website, to find out what needs to be done. The ATO also has a checklist with the steps employers need to take to connect their software to the ATO.
Start reporting any time from 1 July to 30 September 2019.
Apply for more time to get ready – If an employer will not be ready to start reporting by 30 September 2019, they can apply for a deferred starting date (using the ATO's online form).
Ask the ATO for an exemption – Employers that live in an area with intermittent or no internet connection can use the ATO's online tool to apply for an exemption.
Employers with 1 to 4 employees ('micro employers')
Employers with four or less employees (referred to as 'micro employers') that do not currently use payroll software will be able to use other ways to report STP information. The ATO has asked software developers to build no-cost and low-cost (less than $10 per month) STP solutions for micro employers – including simple payroll software, mobile phone apps and portals. The ATO has published a list (on its website) of companies offering, or intending to offer these solutions.
Micro employers will also have the option for their registered tax or BAS agent to report their STP information quarterly, rather than each time they run payroll (this option will be available until 30 June 2021).
Employers with closely held payees
A 'closely held payee' means the payee is directly related to the entity from which they receive payments, for example:
family members of a family-owned business;
directors or shareholders of a company; or
trustees or beneficiaries of a trust.
Employers may not always pay closely held payees a regular salary or wage, and instead may draw on income from the business throughout the year. As STP information is reported each time payroll is run, employers would not be able to report their closely held payees this way, but there are flexible reporting options available to employers with closely held payees.
Employers with 19 or less employees do not need to report closely held payees in 2019/20. Employers will be exempt from reporting closely held payees during the 2020 income year. However, all other employees (i.e., 'armslength employees') must be reported through STP from 1 July 2019 (or a deferred start date if one has been granted). There is no need to apply for an exemption for reporting closely held employees. Employers will be able to lodge payment summaries for closely held employees up to the due date of the employer's income tax return.
Employers with 19 or less employees can report closely held payees quarterly from 1 July 2020.
This report will be due at the same time as the employer's activity statement.
They will need to make reasonable estimates each quarter of the amounts paid to closely held payees, using one of the following methods:
Actual withdrawals (not including payments of dividends or payments reducing liabilities owed to the closely held employee by the employer).
25% of the salary/director fees from the previous year (per quarter).
Vary the previous years’ amount (to take into account trading conditions) within 15% of the total salary for the current financial year.
If employers choose to report closely held payees quarterly, they will have up to the due date of their income tax return to finalise the information they have reported and to make any adjustments.
Employers with 20 or more employees have extra time to finalise closely held payees information.
Once an employer starts STP reporting they should be reporting closely held payees along with arms-length employees; however they will have until 30 September 2019 to finalise closely held payee information (in line with the concessional payment summary annual report ('PSAR') lodgment date).
Deferrals for tax agents
Registered tax (or BAS) agents providing payroll services can report through STP for their clients.
Payroll services include processing payroll on behalf of the employer, or performing any payroll related functions that involve interpreting legislation and helping employers to calculate their PAYG withholding and super guarantee liability.
For deferral requests where an employer client will not be ready to report, agents can apply through:
Tax or BAS Agent Portal – select Client's employer obligations then STP deferrals or exemptions.
Online services for agents – select Business then STP deferrals and exemptions.
Agents will receive a response in real-time for most employer clients with 19 or fewer employees, but for employer clients with 20 or more employees, agents will need to provide supporting evidence to help the ATO understand their circumstances through a portal mail message.
Registered tax (or BAS) agents who will not be ready to report, or who need to submit a request on behalf of multiple clients (via a bulk request), can use the Registered agent bulk client request form (NAT 75015) if:
the payroll software they use has a deferred start date from the ATO and the agent needs additional time to implement STP beyond that date;
the payroll software the agent uses is STP-enabled but they need additional time to implement STP;
the payroll software used is discontinued, and the agent needs additional time to implement new STP-enabled payroll software;
the software used by the agent's clients is STP-enabled but the agent needs additional time to implement the solution across all relevant clients; or
there are other extenuating circumstances where the agent or their clients require additional time to implement STP.
When applying for a deferral, the agent should list all the clients who need to be covered by the deferral. If granted, the agent or their employer clients will need to start reporting through STP on or before the deferral date granted.
NTAA: Note that deferrals may be available for other reasons as well . . .
Ref: ATO website, 3 May 2019
STP exemptions
Under Single Touch Payroll (STP) there are exemptions for reporting:
through STP for a particular financial year, or for certain payments; and
for certain employees through STP.
If an employer is exempt from STP reporting for a particular financial year, they will need to start STP reporting in the following year, or apply for another exemption (and must continue to comply with their existing PAYG withholding obligations). There is no need to apply for the following exemptions, or advise the ATO, but relevant entities should keep records supporting their decision.
Insolvency practitioners
An insolvency practitioner for an employer that is required to report through STP won't be required to report through STP on their behalf in 2018/19, but they will need to start reporting through STP from 1 July 2019.
If the entity is itself an employer with 20 or more of their own employees, they must still report their employees' tax and super information through STP in 2018/19.
Long service leave and redundancy schemes
Employers in certain industries, such as building, construction, or cleaning, may make regular contributions to a long service leave or redundancy scheme for their employees. Those employees who are members of the scheme may then be entitled to a payment of long service leave or termination of payment if certain conditions are met.
Administrators of these types of schemes are exempt from reporting payments to members through STP for the 2018/19 and 2019/20 financial years (if they don't use STP-enabled payroll software to manage those payments), but will need to start reporting these payments through STP from 1 July 2020.
Employers with a withholding payer number ('WPN')
Employers that have a WPN because they are registered for PAYG withholding and are not entitled to an ABN, are exempt from STP reporting for the 2018/19 and 2019/20 financial years (but will need to start reporting these payments through STP from 1 July 2020).
Exemptions for reporting certain employees
Some employers may be exempt from reporting payments made to certain employees through STP for the 2018/19 financial year, including payments to certain foreign employees seconded to Australia.
For the financial year commencing 1 July 2019, the ATO is considering concessional reporting arrangements for these types of employees and will be publishing further guidance soon.
If you need an exemption that is not listed
NTAA: The ATO will also consider granting other exemptions for reporting through STP for a financial year, or reporting a particular employee or group of employees.
Also, employers who run their business in an area with no internet service can seek an exemption for one or more financial years. A registered tax or BAS agent can apply for an exemption on an employer's behalf.
Ref: ATO website, 8 May 2019
Employees and payment summaries
The ATO has also reminded employees that how they get their end of financial year information from their employer, showing their earnings for the year (i.e., their payment summary or income statement) depends on how their employer reports their income, tax and super information to the ATO.
They will be provided with either:
a payment summary – employers that are not yet reporting through STP will continue to provide employees with a payment summary by 14 July; or
an income statement – employers that report through STP are no longer required to give employees a payment summary; instead this information will be made available to the employees through ATO online services via myGov and finalised by 31 July (i.e., when the employer marks it as 'Tax ready').
Employers should let employees know if they won't be giving them a payment summary this year.
Employees with more than one employer may receive both a payment summary and an income statement, and they will need to check that income from their payment summaries is included in their return (e.g., through pre-filling).
The ATO will send a notification to an employee's myGov inbox when all of their income statements are 'Tax ready'.
Note that tax agents will be able to access employees' payment summaries or income statement information (once marked as 'Tax ready') through their software or the Tax Agent Portal (this has not changed).
Ref: ATO website, 1 May 2019
**The above information has been supplied and reproduced with permission from the National Tax Agents Association. For further information please speak to your accountant at JPR Group