The long-awaited Single Touch Payroll system will apply to all employers from 1 July 2019.
On the 1st March 2019, the bill extending Single Touch Payroll mandatory reporting to include small employers (fewer than 20 employees) received royal assent, meaning this is now law.
What is Single Touch Payroll?
Single Touch Payroll is a way of sending payroll information to the ATO from your accounting or payroll software each time you pay your employees. This means that electronically and instantly, you are reporting to the ATO details of salary and wages, PAYG withholding and superannuation contribution information.
This will increase the visibility the ATO has on your employee payment responsibilities and will enhance their data matching abilities, especially in relation to superannuation guarantee.
Importantly Single Touch Payroll will require payments made to business owners in the form of salary, wage, director fee and superannuation (where forms superannuation guarantee) to be reported.
What does Single Touch Payroll mean for employers?
- Need to report employees’ tax and super information to the ATO on or before each pay day
- No longer required to provide payment summaries to employees
- No longer required to complete the Payment Summary Annual Report (PSAR) at the end of the financial year. Instead there will be a Finalisation Declaration at the end of the year, which triggers the information to be ‘tax ready’ so that the employees can complete their tax returns.
In the future (expected 2020) these measures will see W1 and W2 to be pre-filled on activity statements.
What does Single Touch Payroll mean for employees?
- Year-to-date tax and superannuation information in their myGov account
- The law has changed that employers are not obliged to provide an end of year payment summary as it will be available via myGov and called an ‘Income Statement’.
- Increased visibility to check if their superannuation has been paid. Although employers’ requirements to pay superannuation do not change, information that has been reported to the ATO will subsequently be available to employees. Please be aware that employers must pay superannuation at least quarterly.
Is your business Single Touch Payroll ready?
As there is limited time before 1 July 2019 when this law is in action, it is critical that employers begin the process to prepare for Single Touch Payroll now.
What employers need to do before 1 July 2019?
- Identify if your accounting software provider is ‘Single Touch Payroll Ready’
- Connect your accounting software to the ATO
- Review your current payroll processes and clean up data to ensure a smooth adoption
How to process Single Touch Payroll using Xero Accounting Software?
We are pleased to identify that the process to report each pay run is simple using Xero and is ready now. The following steps outline the process:
- Go to your Pay Runs screen under Payroll in Xero
- Check your details, then securely connect to the ATO
- Complete you pay run as normal, then click file.
Further information for Micro Employers
The ATO have categorised employers into 3 Single Touch Payroll groups:
- Large Employers = who have 20 or more employees (have been Single Touch Payroll since 1 July 2018)
- Small Employers = who have between 19 and 5 employees (will be Single Touch Payroll from 1 July 2019)
- Micro Employers = who have fewer than 5 employees (will also be Single Touch Payroll from 1 July 2019)
For Micro Employers there will be a special product available for low cost at or below $10 per month. Currently there are only 6 product options available, however there are many more in development. To assist you with finding the right product for your business, we are happy to work with you over the next few months.
How Rogerson Kenny Business Accountants can help you?
We can assist with the reporting requirements and what information is to be provided each payday. We will work with you to review and improve your current payroll process to align to the new rules and identify the easiest way for your business to report to the ATO correctly. Further, we can assist with payroll and software set up.
If you would like further information on how these changes may impact you, please contact us on 9802 2533.
Article by Matt Dunn