Single Touch Payroll (STP) is a payment system method that reports payments to government agencies. It is an initiative set out by the Australian government to simplify payment reporting and replace group certificates. STP software enables businesses to manage bookkeeping tasks effortlessly while ensuring that all tax obligations are being met.
If you are a new business owner and have been asking yourself: what is STP? Keep reading. This post will explain what it is and what it does.
What is STP Exactly?
Single Touch Payroll allows businesses to streamline their payment and compliance processes through a single action of sending a payment. It is an innovative method for employers to report tax information to the Australian Tax Office (ATO) every time employees receive payments. STP is designed to report a variety of payments made to employees and directors of a company.
Here are some examples of the payments that are reported to the ATO.
- Any payment to an employee, such as wages
- Payments to the director of a firm
- Seasonal Labor Military Program payments
- Employees termination payments
- Parental leave pay
- An employee return to work payment
STP software enables companies to meet the required tax reporting legislation practices with ease.
Introduction of STP
The Australian government originally introduced STP to organizations with a minimum of 20 employees. It came into effect from the start of July 2018. From this point onwards, the tax office advised firms to integrate STP technology into their business processes through a controlled rollout program. The aim was for firms to implement this technology by the end of April 2019.
The next stage of the STP rollout was for all firms with 19 or fewer employees to integrate the technology into their business payment operations. Just like the previous rollout for firms with 20 or more employees, it is also now mandatory for firms with 19 or fewer workers to use STP.
How This Affects NDIS Providers
NDIS service providers who are WPN holders have until 1 July 2022 to implement the mandatory payment system. If you are making use of this exemption, the ATO would prefer you to keep records that support your choice to wait until it becomes mandatory.
STP: Essential Points
- Employees new to the workforce can use the Government Online Portal to complete their tax file number declaration.
- Employers can use STP to notify the Tax office about their PAYG Withholding status during their current payroll cycle.
- STP technology automatically informs the Tax Office of any superannuation contributions.
Additional STP Benefits
- Small companies can manage their business finances in an organized manner.
- It will be simpler to observe a firm’s PAYG withholding and superposition during the year.
- All relevant company data is pre-filled in the BAS, which helps firms to be more time-efficient as they no longer have to fill out the business activity statement from scratch.
- STP technology is also proficient at performing basic calculations.
Business owners have flexibility regarding super payments and PAYG withholding.
- Registering a TFN declaration online is simple and done with greater accuracy with STP technology.
STP Reporting Options
According to the Australian Government Taxation Office, the number of employees you have will signify any concessions and reporting systems available for STP.
Who counts as an employee? Use the list below as a guide for your headcount.
- Part-time employees
- Full-time employees
- Employees based overseas
- Casual Employees
- Any employee who is on leave or absent (unpaid or paid)
Be sure NOT to include the following in your headcount.
- Independent contractors
- Employees who no longer work for you
- Any staff provided through a third-party organization
For more information on reporting options, please view the Australian Taxation Office website.
Decide How You Will Report Through STP
As a new business owner, you will have to determine the best reporting option for your small firm. Here are three ways you can report through STP.
- If you already use payroll software, your Digital Service Provider will inform you about how they offer this STP reporting.
- You have the option of asking a BAS or registered tax agent to do it on your behalf.
- A payroll service provider can report for you as long as they are a registered agent.
Before you get everything set up for reporting STP, be sure to check that your data is accurate. It will include things like employee information. Are their names, addresses, and dates of birth correct? Also, if you have already issued payments to employees, are you paying employees correctly?
Once you start reporting through STP, if you notice that any information is incorrect, you will have some time to amend this. This type of correction is referred to as a ‘fix’ and will not incur any penalties. However, you have to make these corrections promptly or you could be liable to a penalty charge.
If, for example, you are correcting employee information, you should either update it within 14 days of identifying the inaccurate data. Or it should be amended in the next regular pay event. Although, it would have to be in the same financial year.
It is also important to note that some corrections can impact your PAYGW liability. It is because when you correct the inaccurate information, it can change the PAYG withholding that was initially reported to the tax office. If this happens, you may choose to carry forward the correction to your PAYG withholding for the current tax year. Or you have the option of revising your Business Activity Statement for the earlier tax year so that the amended figures can be displayed.
NDIS Best Practice Considerations
As an NDIS provider, running a small healthcare business is very rewarding because you get to see firsthand the positive effect of your work on service users’ lives. However, because you are paid with government funds, there are obligations that come with being an unregistered service provider. Some of these obligations will include things like determining if you need to register for goods and service tax (GST), having a tax file number, holding a valid national police check, and an understanding of NDIS code of conduct practices.
STP: Phase 2
The Australian government is going to increase its data collection efforts through STP. This will involve employers reporting additional information either before or on the date that payments are made. This expansion initiative is known as STP Phase 2. The start date for organizations to meet these new requirements is from 1st January 2022. However, if you need more time to prepare for these changes, you should be able to apply for extra time.
If you are unsure about anything to do with STP reporting, visit the Australian Tax Office Website for more information.