STP to boost transparency, says IPA

The Institute of Public Accountants earlier made a submission to the federal government supporting the implementation of STP, it said in its recently released Small Business White Paper.

The benefits to employers, the IPA said, lie in improvements to the employee commencement and reporting, as well as compliance benefits on the back of a more level playing field for employers.

“Employees will gain new transparency over their pay as you go (PAYG) withholding tax position and super contributions, as reported by employers each payday,” the IPA noted.

On 5 December, the Senate passed legislation to extend STP reporting to businesses with less than 19 employees. Employers with 20 or more employees have been subject to STP since 1 July.

Technically, all businesses will be required to comply with STP reporting from 1 July.

How will small business handle STP?

The government’s pilot program, conducted with a series of small businesses that have fewer than 19 employees, found that small businesses would see limited benefits in the initial implementation of the process.

It suggested that a small but significant minority of small employers will struggle with the implementation if they don’t receive support.

“Depending on the solution pathway a business takes, they are likely to find the change effort and potential cost significant,” the IPA cautioned.

It advised that possible solutions to the information technology challenges faced by small businesses may include the development of a range of strategies and tools, in concert with stakeholders, to bridge the capability and confidence gap these employers face.

What is STP?

Single touch payroll means that every time a business pays their employees, all salary information is sent to the ATO.

This method eliminates the need for PAYG withholding activity statements throughout the year, with ATO arguing it is a more efficient way to run the taxation system.

The ATO is currently in negotiation with software developers to build low-cost STP solutions.