Single Touch Payroll has been spoken about by the ATO for some time, but we will soon see it in practisce and its commencement date is fast approaching!
From 1 July 2018, every employer with 20 or more employees will need to pay their employees using Single Touch Payroll compatible software.
In order to determine if you will be required to report under the new rules, you need to count the employees on your payroll on 1 April 2018. If this count is 20 or more employees, you will be required to report using Single Touch Payroll.
Include in headcount:
- Full-time employees
- Part-time employees
- Casual employees who are on your payroll on 1 April and worked any time during March
- Employees based overseas
- Any employee absent or on leave (paid or unpaid)
- Seasonal employees
Do not include in headcount:
- Any employees who ceased work before 1 April
- 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
Exemptions may only be considered in exceptional circumstances, including:
- You are located in a rural area with no reliable internet connection
- You are only classed as a substantial employer (20 or more employees) because you employ 20 or more employees for a short period of the income year which includes 1 April – for example, due to seasonal work
It is expected that from 1 July 2019 (the following year), pending parliament legislation, Single Touch Payroll will be expanded to cover all employers with less than 19 employees.
It is for this reason that every employer should be preparing themselves now to ensure they will be ready by the date of commencement.
So what exactly is Single Touch Payroll?
The good news is, you will not notice any material changes to your current pay cycles. So whether you pay your employees weekly, fortnightly or monthly, you can continue to do so under Single Touch Payroll.
Single Touch Payroll aligns your reporting obligations to your payroll processes, meaning that each time you process a pay-run your software will report the following to the ATO in real time:
- Salaries and wages amounts
- Deductions (for example, workplace giving)
- PAYG withholding
- Superannuation information
You will therefore no longer be required to provide payment summaries to your employees for any payments reported through Single Touch Payroll. Whilst this will save a lot of time at year end, it will be prudent that the information being lodged with your periodic payroll is correct, as this will be what the ATO will report to your employees to allow them to complete their own tax returns. You will instead be required to make a finalisation declaration that declares you have provided all of the required information through Single Touch Payroll. This declaration needs to be made by 14 July, similar to the previous requirements of providing payment summaries to employees.
There has been some misconception regarding the fact that the payment of PAYG withholding and superannuation guarantee obligations will be made at the same time as processing the payroll and paying the employees. Please rest assured that this is not the case and you will continue to pay your PAYG withholding and superannuation obligations at the same time intervals that you currently do.
How will you report single touch payroll?
The good news is that all of the main software providers (Xero, MYOB, Reckon etc) are in the process of developing enhancements to their existing software that will allow you to report the Single Touch Payroll information to the ATO at the time of completing your payroll, in the same way you currently do. It is hoped these providers will be ready by the commencement date of 1 July 2018 (for employers with 20 or more employees), however the ATO have advised that deferred start dates will be considered should your software provider not be ready by the commencement date. Any business with a current subscription to that particular software will automatically be included in the deferral. Your software provider should be providing regular updates on their progress.
If you are required to report under Single Touch Payroll and are using a manual payment system or software that will not report Single Touch Payroll, you will be required to transition to a new payroll software that is compatible with Single Touch Payroll reporting.
What do I need to do now?
In summary and in order to best prepare for the upcoming changes and introduction of Single Touch Payroll, you need to take the following steps:
- Determine if your reporting requirements will start on 1 July 2018 (for 20 or more employees) or 1 July 2019 (for 19 or less employees) by performing a head-count at 1 April 2018
- Find-out from your software provider if they will offer Single Touch Payroll, and if they will have a deferred start date
- Take the opportunity to review your systems and processes so that you are ready for processing payroll
- Review that you are paying employees correctly, calculating super entitlements correctly and that all employee personal information in your software is accurate and up-to-date
While this may sound daunting, please rest assured that Power Tynan are ready and able to assist with the transition to Single Touch Payroll. We will be contacting you all over the coming months to ensure that you are ready to report from 1 July 2018.