STP essentials (relax, it’ll be okay)

With the 1 July 2019 deadline for smaller employees to start reporting via Single Touch Payroll (STP) looming large on the horizon, Tax & Super Australia speaks with Assistant Commissioner John Shepherd, the ATO’s STP program lead, about the STP essentials, and the finer points, that your clients need to know.

{A downloadable Fact Sheet for you to give clients is available at the end of this blog}

STP has already been a reality for “substantial” employers and those with more than 20 employees from 1 July 2018, and since then has been voluntarily adopted by many thousands of smaller businesses ahead of the 1 July 2019 deadline for employers with 19 or fewer staff.

Assistant Commissioner John Shepherd says that on most business days over May, the ATO saw about 800 to 900 employers starting on STP. “And that includes a couple of hundred substantial employers,” he says. “So those transaction numbers are quite staggering. I’d say every Wednesday, which seemed to be the biggest reporting day at the time, we we’re getting over 1.1 million employee records being reported to us. That’s more than 3 million a week, and those numbers are growing at a healthy rate.”

Noticeable changes
He says that practitioners with business clients should make sure they are aware that their employees will be noticing some changes in the way payroll is reported this year. “The upshot of STP is that payroll data will start to show up in pre-fill fields, which replaces the payment summaries that employees were used to getting,” Shepherd says.

“I would hope that employers will inform their staff of this change, but certainly tax agents need to make sure their clients know that whereas previously a payment summary was supplied, that will no longer be the case — myGov records will now be provided with payroll information pre-filled.” He says the same information will be available to individuals, but will be downloadable on their myGov account through ATO online.

Clients may also need to be informed of another name change. “I say ‘another’ because we are aware that there are quite a few people who still refer to a ‘group certificate’, even though that was changed 19 years ago to ‘payment summary’. This information now will be known as an ‘income statement’, but it looks very much like what is provided at the moment,” Shepherd says.

Small and micro employers
For smaller employers with 19 or less staff, the legislation that passed on 12 February 2019 requires these businesses to use STP from 1 July 2019. “We’ve had 40,000 opt in voluntarily before that deadline,” he says, “but overall there are around 730,000 employers in Australia with 19 or less employees. Really importantly, a huge chunk of these are what we call micro employers, which is classified as having between one and four employees.”

Shepherd points out that one of the challenges the ATO found with this group of very small businesses has been that about two thirds of them currently do not use a payroll software product. “Spreadsheets are still common,” he says, “but also paper solutions are also still fairly common.

“Now we don’t expect to see these employers all land on 1 July, that’s just not going to be feasible. So importantly, the ATO, through a statement released by the Commissioner, has said that the first 12 months will be a transition period, and if employers do their best endeavours, they should not fear penalties.”

To deal with those employers with no software being used, Shepherd says the ATO has been working with industry to come up with low or no cost solutions, and that about 20 options are available at the moment, with more expected, as well as the development of STP apps suitable for mobile devices.

Agent options, and client concessions
For practitioners with such clients, Shepherd says there is also an option for businesses to report quarterly, through a registered tax agent or BAS agent, for the first two years. After that he says it will be expected that these employers can transition to a payday reporting option.

“The new Online services for agents service, which is soon to replace the portals, will be home for any exemption request forms, requests to report quarterly through an agent, a request to allow a recurring delay in reporting (where for example an external bookkeeper prepares the books) and more,” he says.

“Importantly, agents should be aware, and make their clients aware, that there is already available a three-month buffer period upfront. In other words as long as an employer starts reporting via STP by 30 September, they don’t need to apply for additional time if the 1 July deadline is unachievable,” Shepherd says. “This recognises that the legislation did pass quite late, and also that we recognise that July is a very busy time for everybody. So there’s additional time built in already, up to 30 September. But if after that there’s still some time needed to adopt STP, a request for an extension will need to be made.”

He says there is also a catch-all option for those without internet access or those who can’t access the portals, as clients or their agent can also request deferrals and exemptions through the ATO’s telephone service as a fall-back.

Closely held and family businesses
Special arrangements have been put in place for closely-held payees, or for one-person businesses. “This includes where they are a director or a family member, where they usually issue payment summaries later in the year because they do these at the same time as their tax returns (and this can be as late as April the following year),” Shepherd says.

“The feedback we’ve had is there often isn’t a regular pay event, as those people may take a pay once a month or once a quarter depending on how the business is travelling. Or they may periodically take money from the loan account, and then at some stage the agent will go and true that up to determine how much is salary and how much is paid back. At that point they determine the withholding and submit that to the ATO,” he says.

“What we’ve said for STP, given that they’re not running a normal payroll process, is they can report quarterly an estimate of these salary and tax amounts, and then still do that true-up at the end of the year.”

He says it is important for businesses with both closely-held payees and arm’s-length employees to be informed that these special arrangements only apply to the closely-held. Also note that these arrangements are not bound by the time limit of two years set for reporting through an agent, but can be ongoing.

SG reporting upgrade
With STP, there’s also an added protection regarding compulsory super guarantee employer contributions. “Unfortunately in the past, an employee may see a super contribution on their ‘payslip’ and assume that money had gone into their fund. But of course the way the system worked was that such payments were only paid in quarterly,” he says.

“A lot of employers pay every month, but not too may pay every pay event. So the liability will accrue, but the payment may not be in the fund.  So with STP, employers who are late or not making SG payments will be much more visible to the ATO.”

It is also worth noting with your clients that there is a one-off requirement to provide the ATO with a “software ID” before reporting with STP. But also note that should an employer start reporting via STP this financial year, there will be no need to supply payment summaries for 2018-19.

See www.ato.gov.au/stp for much more information, relevant forms and guides and more. For the full podcast on which this article is based, see below.


Like what you're reading? Join our community of 13,000 subscribers and stay on top of tax and super news.

STP fact sheet (available as a downloadable PDF here)

  • myGov records will now be provided with payroll information pre-filled
  • This information replaces payment summaries, which are no longer necessary
  • The information contained in a payment summary will be provided in an ‘income statement’
  • Of the 730,000 employers in Australia with 19 or less employees, a large proportion are micro employers (between one and four employees)
  • Two thirds of these do not use a payroll software product
  • The first 12 months will be a transition period, with predominantly no penalties
  • Low or no cost software is available, as well as STP apps being developed for mobile devices
  • There is an option for businesses to report quarterly, through a registered tax agent or BAS agent, for the first two years
  • The new Online services for agents will give access exemption request forms, requests to report quarterly through an agent, request to allow a recurring delay in reporting and more
  • A three-month buffer period is provided upfront, so employers that start reporting via STP by 30 September have no need to apply for additional time
  • If after that there’s still more time needed, a request for an extension will need to be made
  • Businesses can also request deferrals and exemptions through the ATO’s telephone service
  • Special arrangements have been put in place for closely-held payees
  • Since no regular pay event, closely-held entities can report quarterly an estimate of salary and tax amounts, and true these up at the end of the year
  • These special arrangements only apply to closely-held payees, and are not bound by the time limit of two years set for reporting through an agent (can be ongoing)
  • Employers who are late making SG payments, or are not making them, will be much more visible
  • There is a one-off requirement to provide the ATO with a “software ID” before reporting with STP
  • Should an employer start reporting via STP this financial year, there will be no need to supply payment summaries to employees for 2018-19