Employers will soon have to report all payments to employees directly to the Australian Tax Office under the new Single Touch Payroll legislation.
The new rules come into effect for employers with a complement of more than 20 employees on 1 July 2018. The rules will be extended to cover enterprises with 19 employees or less one year later, on 1 July 2019.
The new legislation has yet to be passed through parliament, but the bill enjoys the support of both sides of the House. Employers may need to update their payroll solution to report through Single Touch Payroll. Businesses that have 19 employees or less can change their reporting voluntarily before 1 July 2019, if they are Single Touch ready.
What is Single Touch Payroll?
When you pay your employees through your Single Touch Payroll enabled solution you will be reporting payments such as their salaries and wages, allowances, deductions and other payments, pay as you go (PAYG) withholding and super information to the ATO at the same time.
Your payroll cycle does not need to change. You can continue to pay your employees weekly, fortnightly or monthly. You may have different pay cycles for different employees. The only obligation is that when you pay your employees, the tax and super information for each employee will be sent to the ATO. This is a more streamlined way of reporting and removes the need for periodic reporting. The upside of this for businesses is that the software will do it all for you, eliminating the need for reconciliations and laborious record keeping and reporting.
The only drawback is that you will have to invest in software that is One Touch ready or take the stress out of it by appointing a payroll practitioner to do it for you. Dexterous Group offers cloud-based payroll services that are One Touch ready through Xero software. We offer monthly fee scalable packages to suit your needs and will handle all reporting, so you can concentrate on growing your business.
How will this affect my business?
There are a few considerations which must be taken into account. How many employees are on your books? Do you have payroll software? Is it One Touch ready? Do you outsource your payroll? If so, does the firm that handles your payroll have One Touch use software?
What you need to do to prepare
A payroll solution is the accounting, business management or payroll software you use to run your payroll and pay your employees.
If you become a substantial employer on 1 April 2018, you will need to update your payroll solution to report through Single Touch Payroll from 1 July 2018. This is unless you have been granted a deferral or exemption.
As payroll software and service providers update their products, you will be able to check when your solution is ready on the Australian Business Software Industry Association (ABSIA) website. You should contact your payroll software or service provider to find out when your payroll solution will be ready for Single Touch Payroll reporting.
If you don’t have a payroll solution
If you become a substantial employer on 1 April 2018, you will need to choose a payroll solution that is Single Touch Payroll ready and suits your business needs.
There are a number of options if you don’t have a payroll solution:
- You may wish to speak to your tax practitioner to find out which payroll solution would be best for you.
- You can use a registered agent or payroll service provider to report to us through Single Touch Payroll on your behalf.
- You can check which payroll solutions are Single Touch Payroll-enabled in the product catalogue on the Australian Business Software Industry Association (ABSIA) website and choose one of them. Over time, this catalogue will be updated with payroll solutions that are Single Touch Payroll-enabled.
If you have 20 or more employees on 1 April, you will be a ‘substantial employer’ and will need to report through Single Touch Payroll from 1 July 2018.
Once you are classified as a substantial employer you will be required to continue reporting through Single Touch Payroll even if your employee numbers drop below 20.
If you are part of a company group, the total number of employees employed by all member companies of the wholly-owned group must be included.
You need to include the following employees in your headcount:
- Full-time employees
- Part-time employees
- Casual employees who are on your payroll on 1 April 2018 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, for example, harvest workers)
Do not include:
- Any employees who ceased work before 1 April 2018
- 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
Penalties, exemptions and deferrals
When you start reporting through Single Touch Payroll, the first 12 months will be a transition period.
During the first 12 months you report through Single Touch Payroll you will be exempt from an administrative penalty for failing to report on time. This is unless we have first given you written notice advising that a failure to report on time in the future may attract a penalty.
The ATO may grant you an exemption from Single Touch Payroll reporting if:
- you are located in a rural area with no reliable internet connection
- you are classed as a substantial employer (20 or more employees) for a short period of the income year – for example, due to harvesting activities.
If you are granted an exemption you will not need to start Single Touch Payroll for the year(s) you are covered by the exemption. You must continue to comply with your existing PAYG withholding obligations including:
- reporting and paying your PAYG withholding liability
- giving payment summaries to your employees
- giving a payment summary annual report to the Commissioner of Taxation.
The ATO may defer the date you’re required to start your Single Touch Payroll reporting if:
- Your payroll solution will not be ready for Single Touch Payroll reporting by 1 July 2018 – The ATO is working with digital service providers to determine if deferrals are required. Contact your provider to check if your software will be ready.
- You have entered administration or liquidation
- You have been impacted by a natural disaster
- You are affected by a circumstance outside your control.
If you won’t be ready to start reporting from 1 July 2018, you will need to request a deferral before that date. Your registered agent can request a deferral on your behalf.
You can find out more about Single Touch Reporting for employers on the ATO’s website.