A new financial year means new rules to play by.
If you’re a small business, 2018 is no different. As of July 2018, businesses with more than 20 employees on their payroll will have to shift over to Single Touch Payroll (STP). And all other businesses with employees aren’t far behind, too.
What does this mean for your businesses? Bruce Edmunds & Associates’ small business accountants explain how this will change your payroll process.
What is Single Touch Payroll?
Before we explain the change however, we need to discuss Single Touch Payroll (STP).
STP is a new reporting change that’s taking effect for the first time this financial year and onwards (so from July 2018).
This is a new reporting system that directly influences the way PAYG tax is calculated.
Simply put, instead of adding up your PAYG obligations in a spreadsheet as the year goes on, you provide the ATO with an information package every time you pay your employees.
This package includes information such as:
- Salary and/or wages
- Allowances and deductions
- Superannuation information
Since all this information is automatically sent to the ATO, business owners will no longer be required to complete payment summaries at the end of each financial year.
Instead, all of your tax obligations related to payroll will be calculated automatically as you go. This reduces the amount of work you have to do when tax time comes around!
Most accounting software already feature allowances for Single Touch Payroll. You don’t need to lift a finger – payroll software will process this information for you.
A handful of businesses have even been reporting their pay-as-you-go (PAYG) tax using single-touch payroll for months already!
Do I need to make the change?
To answer that question, you’ll need to answer another one first.
Namely, do you have 20 or more employees working directly for you?
If so, chances are you’re already using single touch payroll or are planning for it. As of the 1st of July, it’s mandatory for all businesses with more than 20 staff to use this system.
But what about businesses with fewer than 20 employees? Right now, you do not need to use STP. But you might, come July 2019.
Legislation is currently before Parliament to extend STP to all businesses, regardless of how many staff are on their payroll. You might have to start rethinking your payroll soon if you want to keep up.
Alternatively, if your payroll software already has STP functionality, you can get a head-start and start saving time today.
Need help getting set up? If so, you’d best get in fast. Talk to a small business accountant about integrating solutions that offer Single Touch Payroll into your system.
Implications and effects of STP
Without a doubt, the biggest effect is going to be time saved.
Payment summaries can be a pain, especially for small business owners without the benefit of a dedicated bookkeeper or accountant. That’s potentially hours of your time spent performing data entry.
Most importantly, you don’t need to change anything else about your payroll system. You can continue paying your employees on your existing schedule, using your existing arrangement.
That means everything stays the same, regardless of whether you do payroll weekly, fortnightly or monthly.
If your software doesn’t have STP functionality yet, there’s no need to panic. Some payroll solutions have asked for more time to update their products – check with your provider whether yours is one of them.
What this means for employees
While payroll arrangements won’t be affected by this new system, it does provide some interesting opportunities to employees.
For starters, since STP is essentially real-time, you’ll be able to track your year-to-date tax and super information as the year progresses. Each time your employer pays you, you’ll be able to see how that influences your income tax obligation and your tax refund.
All you need to do is log into your MyGov account.
Need our small business accountants to help set up Single Touch Payroll?
Bruce Edmunds & Associates have been helping small businesses and individuals with their tax burdens since 1966.
Our large and experienced team of small business accountants take care of all manner of accounting headaches. In addition to tax reporting, that also includes things like:
- Small business accounting
- Business Activity Statements (BAS)
- Tax wealth accounting
- Financial planning
- Superannuation accounting
Learn how our experienced team can prepare your business for Single Touch Payroll.
Call us today on (03) 9589 5488, or request an appointment with one of our small business accounting specialists.