Why It’s Important To Know What A Single Touch Payroll Is If You Own A Small Business
Small and micro businesses are expected to start/ have started rolling out single touch payroll (STP) reporting this July. This is after the Australian Parliament affirmed the expansion of the new payroll reporting system to all businesses in the country. Initially, the legislation only applied to enterprises that consist of more than 20 employees. But with the recent amendment, businesses with less than 20 workers will soon have to report through Single Touch Payroll. According to the Australian Taxation Office (ATO), small businesses (those with less than 20 employees) have until September 30 to comply. Meanwhile, micro businesses (those with less than four employees) were given options such as quarterly reporting via a registered tax agent.
What is Single Touch Payroll?
The implementation of the Single Touch Payroll is said to streamline the entire payroll reporting process. The goal is to increase the transparency of an employer’s payroll report. This way, the employees are assured that their employers are keeping up with their tax obligations, among other things. For instance, businesses will now be sending data on PAYG withholding, superannuation contributions, and other related salary data every payday to the ATO through Single Touch Payroll. This information will then be used by the ATO to monitor the tax profile of a business in real-time.
Adhering to the new legislation involves a gradual transition. However, a YouGov Galaxy survey showed that more than half of the small businesses are still clueless on how to proceed with it. Complying with the law would also mean that small businesses should go digital in doing their books – but not all of them have the financial capacity to buy a payroll software or to pay for such service. In response, payroll and accounting software like Xero has launched low-cost Single Touch Payroll solutions.
Is Your Business Ready for Single Touch Payroll?
Businesses are the big winners in the roll out of Single Touch Payroll (STP). Through this measure, employers will have a more efficient means of doing their payroll; thus, saving more time and resources. Since the contributions and deductions will be transmitted directly to the ATO, things like PAYG and super information do not need to be filed separately. STP can also help reduce errors when generating the payroll.
While the future of doing STP looks promising, is your business ready for the transition? Here are a few tips on how you can prepare your business in complying with the law.
Choose the software that suits your needs.
How will you report through STP? The key here is in getting the right software that will match your business. Make sure to opt for a service provider that is hands on in setting up the system. Since you are new to STP, look for a provider that offers good customer support while you acquaint yourself with the ins and outs of the software.
Consult your accountant.
Big businesses have adapted to the STP reporting since the enactment of the legislation last year. Consult your accountant regarding your compliance obligations and alternatives in STP reporting.
Onboard your people.
Fill in your staff about the changes in payroll reporting and how it relates to them. This is also a good opportunity to be transparent regarding their wages, super entitlements, and overpayments. As a business owner, it is your responsibility to get your people to set up their own myGov accounts. Once the STP reporting commences, this will be where your staff can get hold of their payment summaries and tax information.
Start updating your employees’ personal information. These include their name, birth date, address, superannuation number, and tax number. The ATO will be needing these details once you begin your STP reporting.
Ask for support.
The ATO can give leeway for businesses in case they cannot meet the September 30 deadline. They just have to apply for a deferral. If you need more support, fact sheets are available on the ATO’s social media pages. You can also ask for assistance from your registered BAS agent.
Single Touch Payroll Software for Small Businesses
Data from the ATO shows that 90,000 micro businesses don’t currently use any software in processing their payroll. On the other hand, most of the small enterprises rely on spreadsheets, tax tables, and Post-it notes when doing their books and ledgers. Because of this, the Government has started making headway in helping businesses with the digital move.
In order for micro employers to bring about the changes in payroll reporting and accounting, the ATO made a list of low-cost solutions from software companies and service providers. In a statement, the ATO said that these services will not cost more than $10 a month, necessitate software maintenance, and take only a few minutes to be performed every pay period.
One of the most popular Single Touch Payroll software is Xero, with at current 1.8 million subscribers, more than 700 third party apps, and at least 200 connections to banks and financial service providers. The company offers two standalone solutions for micro businesses: a $10 a month Payroll-only product, and an option to include Payroll to a ledger for its existing partners.
Xero is highly recommended for small and micro businesses that are just starting to adapt to STP reporting as it is inexpensive and extremely easy to use. It utilises the cloud, is easy to use, and offers 24/7 customer support. The software will efficiently transmit wages and salary data, PAYG withholdings, and super information directly to the ATO. All transactions done in Xero are also guaranteed to be secure and reliable.
Another software that you can use is MYOB. According to David Weickhardt, MYOB General Manager for Products, they are offering a low-cost approach in complying with STP reporting while helping micro businesses manage their employees at the same time.
MYOB and Xero share some similarities in terms of solutions, product features, and pricing. Like Xero, MYOB has two standalone product offerings, both of which are available for $10 to micro businesses.
The first solution is called MYOB Essentials Payroll. Micro businesses can take advantage of its automated tax and superannuation reporting, which are essential in adhering to the STP rules. With this product, business owners can organise timesheets, send payroll data to the ATO, and pay employees their salaries. The second one is an STP-compliant payroll component for one of its products, MYOB Connect Ledge. “While there is a cost involved when signing up for a software subscription, the business owner’s time is so much more valuable than that fee and they get many benefits beyond STP reporting.”, Weickhardt said.
Reckon is the market leader in business solutions and practice management. In an effort to help micro employers to be STP compliant, they launched an STP software that costs $10 per month – the Reckon One. In a nutshell. Reckon One allows business owners to keep track of their cash flow and process pay runs. They can even create their STP lodgement directly in the software. In addition, users can review their submission before sending it in, monitor ATO messages, and access their STP history.
What sets Reckon One apart is that it does not cap the number of employees that can be added in the payroll. Users can pay all of their employees’ salaries and superannuation with no extra cost.
Sam Aller, CEO of the Reckon Group, warns small and micro businesses about “too good to be true” STP solutions. “While the bare minimum may keep you compliant for now and may seem cheap, you could be easily locked into a solution with nowhere to go, spending more money than you should, and unable to use an alternative vendor without substantial switching costs,” Allert said in a statement.
You can check more STP reporting software and service providers here.