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Single Touch Payroll requirements for micro employers

Introduction of Single Touch Payroll

The Australian Government started the Single Touch Payroll (STP) requirements in 2018 as an initiative to reduce employers’ reporting burdens to government agencies. As of 1st July 2018, businesses with over 20 employees must report their employees’ tax and superannuation information to the ATO via STP-enabled payroll or accounting software. Businesses with 19 or fewer employees have another year to prepare but they can elect to report through STP prior to 1st July 2019, if they’re ready.

In addition, there are other deferral or exemption available to small employers (19 or fewer payees) and foreign entities with inbound assignees.

Single Touch Payroll works by sending tax and super information from the employer’s STP-enabled payroll or accounting software to the ATO as and when the payroll is being run. The STP enables the employers to send the required payroll related information to the ATO in the approved form.

The frequency of Single Touch Payroll reporting will not change the employer’s usual pay cycle (ie the employers can continue to pay the employees weekly, fortnightly or monthly, while reporting the STP on a monthly or quarterly basis, as required based on the relevant requirements for each class of entities).

The main benefit of Single Touch Payroll is to help employers streamline their reporting process to the ATO. With information provided after each payroll cycle, the ATO will be able to pre-fill PAYG sections of BAS for employers and eliminate potential errors and double handling. Furthermore, this could eliminate the need for employers to generate and distribute payment summaries to their employees at the end of the financial year. Instead, employees may be able to obtain this information via their myGov accounts. Notwithstanding this, at the end of each financial year, the employers

Once an entity is required to start Single Touch Payroll reporting, they have two main options:

  • engage a payroll service that provides STP reporting, such as one offered by a tax or BAS agent
  • prepare their own payroll reporting using payroll software that incorporates STP reporting. This includes accounting software with this feature or a standalone payroll software that handles STP. There are currently digital service providers that offer no-cost and low-cost STP solutions for micro employers, including simple payroll software, mobile phone apps and portals. Please speak to a team member in Andersen if you would like to find out more.

Read also about the Employee Share Schemes reporting deadlines

Quarterly reporting concession for micro employers

micro employer is currently entitled to report through their registered tax or BAS agent on a quarterly basis until 30 June 2021, if they have been approved with this concession. Foreign entities with inbound assignees who have their payroll remain with their home country but have PAYG withholding reporting requirements in Australia are also currently eligible for this concession. For most micro employers already using the services of a registered agent and have been approved to lodge the STP report on a quarterly basis, the due date for the STP lodgment will be the same as the due date of their activity statement (if they are also lodging the activity statement every quarter).

A micro employer is an employer with four or fewer employees.

If the micro employers lodge activity statements monthly, the due date for their quarterly STP report is the same day as their last monthly activity statement for that particular quarter.

The due date for lodgment of activity statements is dependent on an employer’s annual PAYG withholding amount. Generally, the due date for filing activity statement and payment of PAYG withholding amount to the ATO for each type of entities are:

  • micro employers (which is also an employer with small withholder status, ie. with annual withholding amount of AUD25,000 or less) – each quarter
  • employers with more than AUD25,000 and up to AUD1 million annual withholding amount – each month
  • employers with more than AUD1 million annual withholding amount – within six to eight days of a withholding event taking place.

If you are a micro employer and is eligible to lodge Single Touch Payroll reports quarterly, Andersen Australia could assist to review your withholding status to determine if you are also eligible to lodge your activity statements quarterly to coincide the STP reporting with the lodgment of your activity statement in order to streamline your reporting process.

Also read about the New Proposed Corporate Tax Transparency Measures

Changes of Single Touch Payroll reporting for micro employers from 1 July 2021

From 1 July 2021, the quarterly reporting concession will change. It will only be considered for micro employers experiencing exceptional circumstances.

To be eligible for this quarterly reporting concession, employers must meet all of the following:

  • be a micro employer on the day they apply;
  • lodge their activity statements electronically through a registered tax or BAS agent;
  • have a non-computerised payroll. This could include running their payroll manually and keeping records on a spreadsheet or paper;
  • all amounts owing to the ATO are either not yet due or subject to a payment plan;
  • all lodgment obligations are either not yet due or subject to a deferral;
  • for applications for a period commencing after 1 July 2021, the micro employers must also meet the guidelines for exceptional circumstances.

The ATO has clarified what will be considered exceptional circumstances, as below:

  • Exceptional circumstances that would generally be fair and reasonable for the ATO to grant a deferral as set out in Law Administration Practice Statement (PSLA 2011/15). For more details, please refer here.
  • Seasonal or intermittent workers – for micro employers who generally have either no or between one and four employees for most of the year and then increase their workforce for less than three months of a financial year.
  • No or unreliable internet connection.
  • Any other unique circumstances which will be considered by the ATO on a case-by-case basis.

If you are a micro employer and require the quarterly reporting concessions, please contact one of the team members at Andersen Australia to discuss if you may be eligible for the concession from 1 July 2021 based on your entity’s circumstances.

The ATO has however indicated that the applications for the quarterly reporting concession with exceptional circumstances from 1 July 2021 are not currently being accepted. At the time of this writing, there were no further updates from the ATO regarding this application and will provide further update once this information is available.

Given the Single Touch Payroll rules are not as simple as some sources suggest and this article does not cover every aspect of Single Touch Payroll reporting, for more information on the Single Touch Payroll requirements for your entity, we recommend you seek advice from your tax professional or contact members from Andersen Australia regarding your corporate tax.

For any enquiries related to this update, contact us today.

Shenny Yee

Shenny Yee, Tax Manager of Corporate & International Tax at Andersen Australia, leverages 15+ years of global experience in Singapore and Malaysia. She applies analytical skills to deliver tailored solutions in corporate tax, GST reporting, PE risks analysis, and more.

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