As one of Australia’s 730,000 small business employers, you may have heard about Single Touch Payroll by now (and if you haven’t, that’s okay – we’ve got you). Perhaps you’re worried about what it means for your business, or you’re just feeling plain old confused.
Single Touch Payroll, also called STP, is an ATO initiative to establish real time digital salary reporting for employers. This means you’ll now be required to report salaries and wages, PAYG withholding, and superannuation information, every time you pay your employees.
Our research shows that many small business owners either don’t understand their STP obligations, or fear that becoming compliant will cost them valuable time and money. With help from John Shepherd, the ATO’s Assistant Commissioner for the Single Touch Payroll Program – aka The STP Guru – we’re here to calm your concerns (update: after three years of leading the charge on all things STP, John has now handed the mantle to Jason Lucchese). And in the process, you just might discover you’ll find more time to do what matters: running your business.
What does STP actually mean for my business?
It’s official: all Australian small business owners are required to report their payroll information to the ATO digitally. That means it’s now mandatory for all employers (whatever their size) to adopt a compliant STP payroll or reporting solution, which will likely be software based.
Tell me, what are the benefits of STP?
We’re glad you asked. As a result of STP legislation, countless small businesses will make the move to using online payroll technology, some for the first time. Those that have already transitioned to digital systems say it’s revolutionised the way they operate, with our Xero State of Payroll Report indicating small businesses have found decreased errors, savings in time and money, and increased employee satisfaction – not to mention more all-important mental space.
A master in all things STP, John explains, ‘STP is a win-win for employers and employees because it streamlines the payroll reporting process for employers and provides greater transparency around super entitlements for employees.’
Help! What do I need to do to become STP compliant?
Firstly, there’s no need to stress. ‘The most important thing you can do right now is have a conversation. Talk to your accountant, bookkeeper, tax or Business Advisory Services agent if you have one. If you use software, look at the information they provide on STP. There’s plenty of support out there, and you won’t be alone’, says John.
‘This is a big change, yes. But the software developers have done a really good job of building tools to meet the STP reporting requirements into their product so it’s really easy to do.’
Indeed, the good news is that if you already have a Xero subscription, you can be STP ready in a matter of clicks.
What if my business only employs between one to four people?
Small businesses will be given plenty of guidance. John clarifies, ‘We understand the move to real-time payroll reporting may be a big change for employers, especially small businesses. We want to help people get it right and the ATO is taking a supportive, tailored approach to help them undertake this change.’
‘For those with one to four employees, we’ve worked with software providers to support the development of low-cost reporting solutions including simple payroll solutions.’
The Xero team has been hard at work creating a plan to provide businesses with one to four employees access to a simple digital payroll solution, called Payroll Only. Along with helping you become STP compliant, you’ll discover benefits like increased accuracy and faster employee payroll calculation – all of which means more time to do what you love.
What happens if I make a mistake?
During the first year, the ATO has said they will not pursue penalties when businesses are making the effort to do their best to comply with the law. As John explains, ‘We don’t want to apply any penalties in this first year, so what we need is for people to actively engage, including if they feel they will need more time.’ Of course, it always pays to be prepared. He advises, ‘The sooner you begin to take proactive steps, the better. Start the conversation with your advisor and look into the products that best suit you.’
Lastly, how can I stay up to date on all things STP?
Naturally, the ATO is your go-to for staying on top of all things STP: ‘Check out our website ato.gov.au/stp where you can find all our up-to-date information. You can also keep on top of any events, news and resources. If social media is more your thing, follow the ATO on Facebook, LinkedIn and Twitter.’
Single Touch Payroll is here. Xero lets you file your pay runs with the ATO in a matter of clicks – and getting setup is a lot easier than you might think.