Treasury’s proposed changes to accounting standard-setters
Treasury issued documents in 2022 and 2023, proposing changes in the structure and roles of the standard-setters the...
READ MORE
To avoid unwanted attention from the ATO and keep your clients above board, you’ll need to be totally across the new Single Touch Payroll reporting legislation.
Employers may have heard their payroll team throw around the term ‘Single Touch Payroll reporting’ (STPR) recently.
The STPR legislation was part of the Budget Savings (Omnibus) Act 2016 that received royal assent in September 2016. However, employers are only now starting to recognise what this might mean for them.
The introduction of STPR will change the way employers report payroll payments to the ATO, including PAYGW and superannuation, by requiring detailed payroll information to be reported in real time to the ATO. The STPR certainly has some administrative benefits, such as removing the need to issue payment summaries at year end. However, there are a few things that need to be in place before the 1 July 2018 compulsory switch takes place.
From 1 July 2017, any employer regardless of size will be able to choose to adopt the STPR on a voluntary basis. However, from 1 July 2018, it will be compulsory for ‘substantial employers’ with more than 20 employees to use STPR.
What’s changed?
The main changes you will notice when adopting the STPR are:
What’s remained the same?
Pros and cons
The implementation of the STPR will effectively introduce a two-tier system of approved methods of reporting to the commissioner. This consists of the STPR for PAYG withholding and superannuation guarantee, while all other withholding amounts are still required to be lodged and reported through BAS, e.g. FBT and PAYG Instalments.
While the STPR may alleviate some administrative burdens for employers and is promoted as a way of aligning existing payroll functions with reporting obligations, it remains to be seen how many employers opt to align the payment of their PAYG withholding with their STPR reporting dates after they consider the cash flow disadvantages.
A further concern is the expectation or assumption the STPR will mean that employees will be able to view their payroll-related information and annual payment summary online through myGov. This will require employees to set up an online myGov account, which is a further level of administration for both taxpayers and potentially their tax agents.
Once such an account is established for tax purposes, all tax-related information such as assessments notices etc. are routinely sent to the myGov account, rather than by post. If the employee has a tax agent, there may be further administrative problems as it will require tax agents to obtain these documents from their clients or check the tax agent portal regularly to see if any new documents are available, e.g. to check their assessments, which differs from current practices.
Moreover, STPR means the commissioner will have access to even more information to perform data-matching in determining if all superannuation guarantee charge (SGC) and PAYG withholding obligations are met. Any errors by employers using this system are likely to drastically increase the chances of an ATO audit or review.
However, it may be possible to run reports periodically from the new STPR software that show all the information that has been reported to the ATO, allowing errors to be identified in time to correct the amounts before the end of the financial year.
Before the compulsory 1 July 2018 start date, employers will need to ensure their payroll system is STPR-enabled to be compliant with the new law. This may involve additional cost for employers, particularly those that do not currently use software-based payroll systems.
A range of payroll software providers are working with the ATO on product updates from 1 July 2017. To help with the transition to STPR, it was announced in the STPR media release by the Revenue and Financial Services ministry that the government will offer small businesses, with a turnover of less than $2 million, a $100 non-refundable tax offset for STPR enabled software. The offset will be made available for new software purchases or subscriptions made in the 2017-18 financial year.
What should accountants do now for their clients?
The message to clients should be that now is the time to review your current internal processes to ensure you are ready come 1 July 2018. Consultation with your software provider will form an important part of the review to confirm they have the capability to interface with the ATO’s systems.
Accountants and business advisers need to ensure that their clients’ current business practices are compliant with the various federal and state taxes that will be under the spotlight like never before.
It is anticipated that the ATO will start reviewing real-time data from 1 July 2018, so those businesses that have planned early will be well placed to avoid any unwanted attention from the tax office.
Jason Daniels, partner of business services, BDO Brisbane