In December 2017 we published an article about Single Touch Payroll (https://www.kbca.com.au/single-touch-payroll/ ) which will commence for employers with more than 20 employees from 1 July 2018. All other employers are due to commence using single touch payroll from 1 July 2019 (subject to legislation passing parliament). If you have less than 20 employees, but would like to voluntarily start using Single Touch Payroll, you are able to do so from 1 July 2018.
Am I over 20 employees?
The employee count to determine if it is mandatory for you to commence reporting from 1 July 2018 needs to be completed as at 1 April 2018. The ATO website contains the following guidelines to assist you in determining if you have exceeded 20 employees:
|Include in headcount||Don’t include in headcount|
|full-time employees||any employees who ceased work before 1 April|
|part-time employees||casual employees who did not work in March|
|casual employees who are on your payroll on 1 April and worked any time during March||independent contractors|
|employees based overseas||staff provided by a third-party labour hire organisation|
|any employee absent or on leave (paid or unpaid)||company directors|
|seasonal employees (for example, harvest workers)||office holders|
Is my current software single touch payroll ready?
The three major suppliers of accounting software for small/medium businesses, MYOB, Xero and Intuit QuickBooks are all still working on updating their platforms to be compliant with single touch payroll. At the time of writing this article, all three suppliers confirmed that they were on track to have these software changes released prior to 1 July 2018. This may not leave businesses with a lot of time to implement the changes.
However, there are changes you can implement now, to assist with the transition to single touch payroll.
- If you are currently using an older version of software, that does not include software updates (usually a monthly or annual subscription), you will need to check if single touch payroll will be supported in your current version. If it is not supported you are either going to need to upgrade your subscription or change your accounting software.
This presents a great opportunity to review your entire accounting system, and consider what new features may be able to save you time and money. Talk to your accountant, as many of the new cloud based products have a number of time saving features and there are also numerous App providers that link in with your accounting software and provide industry specific features that seamlessly link to your accounting system (i.e. café / restaurant ordering systems, builders apps that allow them to cost jobs, generate quotes and convert these quotes directly into invoices, project management tools, etc).
- Review your business processes for payroll. Single touch payroll means that as soon as you pay an employee, the information will be sent directly to the ATO. This means the information needs to be correct. As part of this review, the ATO suggests you check the following:
- Are your employee’s details all correct in the system? i.e. names, dates of birth, address, TFN
- Are you paying your employees the correct rate of pay? It is essential that businesses stay on top of changes to award rates and minimum wage rulings. You also need to check that any allowances that are required by the Award or Agreement are being paid to employees. A good source of information about rates of pay is the Fairwork website (https://www.fairwork.gov.au/).
- Are you calculating superannuation correctly? Refer to the ATO website (https://www.ato.gov.au/Business/Super-for-employers/How-much-to-pay/Checklist–salary-or-wages-and-ordinary-time-earnings/) for the types of wages and allowances that should be included in the calculation of ordinary times earnings for the purpose of calculating superannuation contributions. If you have added wage categories into your payroll system, you need to ensure these new categories are being included in the superannuation calculation (if applicable)
Note – as the ATO will have information regarding superannuation as soon as your pays are processed they will be able to better track whether employees are meeting their superannuation obligations. The cut-off date for superannuation payments is 28 days after the end of quarter. If you are late making your superannuation payments, you will need to lodge superannuation guarantee charge statements and pay interest and administration fees to the ATO.
- Check if you are addressing overpayments correctly? Under the new single touch payroll you will be required to amend the information you have sent to the ATO either in the next pay period or as an adjusting event. For more information about adjusting events, see https://www.ato.gov.au/Business/Single-Touch-Payroll/In-detail/What-you-need-to-report-through-Single-Touch-Payroll/?page=3#Correcting_a_pay_event_report
- Check that your software is calculating PAYGW correctly. There are only limited circumstances where an employer is not required to withhold from an employees pay. It is timely to check that any wage or allowance categories that are not being taxed by your payroll software are correct.
How will I connect my software to the ATO?
If you have an existing Auskey, you will be able to activate the connection between your software and the ATO using this Auskey.
If you do not have an Auskey, MYOB and Xero have confirmed that you will be able to call the ATO and provide your software ID number to the ATO who will then authorise the connection on your behalf. Please remember the person who calls the ATO will need be an authorised representative (i.e. Director, Sole Trader, Tax Agent, etc).
Do you need more time to implement the changes?
Software providers are able to apply for a deferral, if they are not going to be ready on time. If your software provider applies for a deferral, there is no need for you to also apply for a deferral (so long as you are ready to commence single touch payroll by the software providers deferred start date). You can contact your software provider to find out if they have a deferred start date.
If your software provider is ready to go, however, and you are not ready by 1 July 2018, then there is an opportunity to apply to the ATO for a deferral. The ATO will consider your deferral request if you:
- have entered administration or liquidation
- have been impacted by a natural disaster
- are unable to get ready by your software provider’s deferred start date
- are transitioning to a new STP-enabled solution
- are using a customised payroll solution and you need time to configure and test your updated product
- have complex payroll arrangements and need additional time to transition to STP
- are affected by other circumstances which are out of your control.
Now is the time to act!
Don’t wait until 30 June 2018 to start implementing your changes. Not only will this be stressful for you, if you require significant changes to your payroll or accounting systems, the process is going to be rushed and opportunities to improve your accounting systems and processes may be lost.
Please contact one of our helpful accountants on (02) 4365 6789 if you would like more information about how the changes will affect you.