Welcome to the new revolution introduced by the Australian Taxation Office (ATO) – Single Touch Payroll (STP). You aren’t alone if you run a business and are wondering if this new legislation applies to you. There are a lot of businesses scheduled to begin transition to this system over the coming weeks, and a lot of business owners with their hands in the air unsure of what to do next.

Enter your trusty financial sidekick friend (me) to help break down the jargon into ‘real person speak’, and equip you with the knowledge you need to tackle this new legislation, and avoid the wrath of the ATO.

So what is STP?

In short, STP is a framework created by the ATO whereby wage, PAYGW, and superannuation data will be automatically provided to the ATO every pay period. Think of the ATO as Big Brother, and your business as one of the participants (they will be silently watching)…

Don’t be alarmed, the ATO won’t be digging through your bookwork sussing out the last time you put petrol in your car (yet), but they will be receiving live data from your payroll transactions, and collating it.

Before you get in a sweat trying to work out how you’re going to sync up your pay period to the ATO’s standards, don’t panic. This new legislation does not mean that employee pay periods will need to change at all. Staff can continue to be paid weekly, fortnightly or monthly, but as these payruns are processed, the information relating to the payrun will be sent to the ATO.

It’s also important to know that STP is purely a reporting system, meaning that you won’t be making actual payments towards your super and PAYGW obligations as the information is lodged with the payruns to the ATO. Payment dates for payroll liabilities remain the same.

How will this happen?

Good news and bad news (I’ll get the bad stuff out of the way first)…

Bad news is that anyone relying on manual forms of payroll reporting such as spreadsheets and paper payroll ledgers will need to move to a cloud based software solution that is STP compliant.

Good news is you get to ditch those unreliable, time-consuming, manual solutions, and embrace the efficiency of the cloud. 🙂

The ATO has thoughtfully considered the cost to the business owner in making them transition to online accounting programs, and in an attempt to compensate, have worked with software providers to create low cost, budget friendly options for micro-employers (1-4 employees), priced at less than $10 per month. I have included the link for these software providers in the resources section of my STP cheatsheet, along with various other helpful references.

What will this change?

There will be a couple of noticeable changes as STP becomes more common. The most noticeable of these will probably be that the ATO will keep a live tally of Year To Date (YTD) figures for all of your staff members every pay period that is lodged. This means that when your business is transitioned to STP, your employees will be able to access their YTD earnings on their My Gov accounts throughout the year. These figures will then be available for pre-filling into their income tax returns at the end of the financial year.

If I totally lost you there, I’ll take one step back. STP means no more ‘Payment Summaries’ (group certificates for us oldies) for general wage and PAYGW payroll. Instead, STP means ‘Income Statements’ will be in the form of finalised payroll figures to be accessed by the employee through their online My Gov account.

This change also means that although the software packages have tried to make it super simple for small biz owners, great care will have to be taken when registering for STP, and then preparing and lodging payruns every week. The ATO have some pretty strict guidelines about how they want the data transmitted to them when it comes to categorising allowances and deductions, etc. As you can imagine as well, with Big Brother watching, you are going to want to make sure that those wages are on point every payrun. That being said, the ATO and software packages have made it so you’re able to make changes and amendments to any incorrect STP lodgements made. I’ve popped a couple of riveting tables outlining how the ATO wants the payroll categories submitted in the cheatsheet, happy browsing. 🙂

When should I get on board?

This depends on how many employees you pay, but my advice to you would be that if you are not already registered and submitting through STP, you need to be looking into registering now, or taking steps to get started.

In general, if you employ more than 20 employees, you should already know all about STP – because you would have been using it this year (unless you had an approved transitional arrangement). If you employ fewer than 20 employees, you should be learning everything you can, so that you can jump in 1st July (although the ATO are trying to be fair about the transition, and as such, have given some leniency around these dates). If you are classed as a micro-employer, which is an employer with 1-4 employees, the ATO has advised that they will offer alternate solutions to those who lodge with registered BAS or tax agents (such as Save My Books).

I have listed the dates and details for registration, straight from the ATO on the cheatsheet I designed for you.

What should I be doing?

  1. If you’re a business owner, or you do the bookwork for a business owner, start doing your research now. This legislation isn’t going away anytime soon, and there is a lot involved – you’re better off being in the know.
  2. Start educating your staff about how the new reporting system is going to affect them. I have no doubt that many employees are going to be shocked when they realise they can’t collect the traditional paper Payment Summary anymore. I would hazard a guess that some may even be happily oblivious to the fact that they can create a My Gov account, which will give them access to much more than just their YTD earnings.
  3. If you have a business advisor, first, make sure they’re a registered BAS/tax agent (don’t get me started on that rant), and second, have a chat with them about how they might be able to make this transition a little smoother and less stressful for you and your business.
  4. Download my cheatsheet. Get the (boring) in-depth details with the dates, lodgement requirements, procedures, and list of helpful resources for your transition.
  5. Pour a cuppa, grab the biggest bag of M&M’s you can find and either sit at your computer and get it done, or catch up on Netflix (if you’ve hired a registered agent to do it for you).

Want The Cheatsheet?