360 Degrees: Are your clients STP ready?

Kylie Parker, director, Lotus Accountants

Clients of Lotus Accountants know single touch payroll (STP) is commencing from 1 July 2019. Given our client base is largely on Xero, we are in the fortunate position of only needing to start the reporting process. Accordingly, we have already advised all our clients that we will assist them with this as part of the 2018-19 tax planning meetings we have each year and will also provide an online webinar in May.

For many of our clients with employees, this reporting process will not impact their day-to-day operations. There may be a learning curve around any adjustments required and in fact we have a few clients who seem to always miscalculate commissions so it also provides an opportunity to take over the payroll function.

We are also in the position where many clients who are related parties already operate in their business as employees to avoid future tax debts building up. This is effectively a forced form of saving and also provides superannuation payments that may not be made in the event dividends were used as the form of profit distribution.

Where we have clients with closely held employees who are not yet in the cash flow position to consistently pay a salary, as often they are caught chasing their Division 7A tails, we will be requesting the annual deferral and really focusing next year on trying to build up their business so that their personal incomes are more in alignment with their expenditure and tax obligations.

The ATO have some great information on their website and I’d be dedicating someone in your team to start reviewing all clients and putting in place an action plan today.

Josh Lowe, accountant, The Gild Group

In terms of our clients, the short answer is – no. Not yet, anyway.

Seeing as we don’t have any clients with 20 or more employees, we avoided the first deadline for mandatory STP reporting.

With 1 July 2019 fast-approaching, our plan for the remainder of our clients will be as follows:

• For those already using payroll or accounting software that offers STP, we will ensure they are securely connected to the ATO. If they run their own payroll, we plan to send instructions on how to connect to the ATO and make sure they’re STP ready.

Luckily, the majority of our payroll clients are on Xero – so this part should be relatively simple prior to 1 July (fingers crossed!).

• For our payroll clients that aren’t currently using STP-enabled payroll or accounting software, this may prove to be slightly more difficult. In the coming weeks, we plan to send out a MailChimp outlining their options for STP reporting.

Seeing as we would, at a minimum, already hold a ledger file for these clients – we will most likely take advantage of Xero’s soon-to-be-released payroll-only subscription option for partners. These will be able to be added to ledger and cashbook files (price still to be determined by Xero though).

The above is our plan of attack, we will see how it goes once we get in contact with clients in the next few weeks!

Miriam Holme, founder and senior accountant, Fab Tax Accountants

At a recent industry event where STP was one of the main focuses I was quite surprised to hear from other practices the number of their business clients who did not even use software that offers STP. The accountants and bookkeepers were discussing that they were still getting quite a bit of resistance from their business clients who had always done their payroll offline or in a traditional way for many years.

They also had businesses in areas where internet coverage was still an issue and were concerned about how they could meet their STP obligations.

These conversations made me realise how fortunate my business is as we have always made sure that all our business clients use payroll software that offers STP. Whilst a lot of our clients have not needed to be registered for STP, we have been pro-actively working with our clients to enable this before the deadline and are now reporting real time to the ATO.

I have also been warning businesses on social media channels that they need to be registered for STP. A lot of businesses have given me feedback that they have no idea what this is and I anticipate a panic and mad rush when the deadline kicks in.

As the deadline approaches, it has been a great opportunity for me to talk to new businesses so that they understand what their obligations are and make sure their payroll processes are up to scratch.

Lielette Calleja, director, All that Counts

We are extremely fortunate to say that all existing clients will be STP ready as our bookkeeping firm currently only supports STP ready accounting solutions like QuickBooks Online, Xero and MYOB.

Having the software is one component but our focus for the last 12 months has been around our client’s payroll processes. The software is useless if you haven’t streamlined client functions around timesheet entry, onboarding new staff, terminating staff and payroll authorisation.

In terms of clients being aware of the changes, we have been having direct conversations with them since STP was introduced. Clients rely on us to provide them with the education piece around STP for themselves and their employees. One of the challenges for both parties is getting their head around the need to register for a myGov account via the ATO online services portal, as this will be their go-to portal to retrieve their future payment summaries.

A significant aspect around STP for my clients is cash flow. Apart from the obvious changes to processes and online solutions, we need to assist them in cash flow management.

It’s not unusual for small business owners to not pay their superannuation on time so we are going to see more businesses struggle with the transparency of payroll liabilities.

STP is an opportunity for all businesses to improve on their current business processes and we most certainly welcome it.

Tracey Dunn, senior manager, RSM Australia

Speaking to small business owners it is interesting to compare the mindset towards implementation of a single touch payroll (‘STP’) compliant accounting system to the mindset toward the opportunity to utilise the instant asset write off and purchase business assets.  Many small business owners welcome the opportunity to buy business assets costing anywhere between $100 - $30,000 (ex GST), but demonstrate resistance to purchasing a subscription to a cloud based STP reporting program for $10 per month or less.

There are real opportunities for accountants and advisers to be proactive in educating clients of the benefits STP and cloud based accounting systems and the positive impact these systems can have on business success.  The message that appears to be missing is that an STP compliant accounting program could be one of the most important business assets a small business can acquire.

STP reporting will not only simplify reporting employee payroll to the ATO, the move from paper based accounting and reporting systems to a cloud based STP compliant accounting system may provide significant benefits to small business owners from real time management reporting.

Small business owners, with the right support and training have the opportunity to not only simplify their payroll reporting, but also access timely management and financial information and reduce the cost of annual taxation compliance.  

Keeping in mind also, for many small business owners the transition to STP reporting will be as simple as the click of a button particularly if they already use a cloud based accounting system such as Xero or Quicken.

Business and taxation advisers are encouraged to be proactive and contact small business clients, particularly those who have paper based accounting and payroll records, as these clients may not be aware of the requirement to transition to STP reporting from 1 July 2019.