In recent years, Australian small businesses have been under growing pressure to comply with more payroll reporting regulations, the most recent being the introduction of Single Touch Payroll (STP) by the Australian Taxation Office (ATO) in 2019.
Two years in and many business owners are still unclear of their obligations and risk non-compliance penalties. The prospect of an audit is also concerning for business owners: the most recent Tax Audit Claim statistics show that 39.93 per cent of audits in 2020-2021 were related to Payroll, STP and BAS.
While some small businesses initially got deferrals for STP phase 1, most exemptions ended on July 1st. With STP phase 2 now being rolled out, there is even more to lose for businesses that aren’t compliant.
Luckily, there are easy steps business owners can take to lift the compliance complexity and anxiety weight off their shoulders.
Understanding STP compliance
STP requires that each time employees are paid, details such as gross pay, tax and super are reported to the ATO in real-time using approved payroll software.
This data is used by the ATO for various purposes such as verifying employee superannuation or checking payroll information for Government programmes like JobKeeper and JobMaker.
With STP phase 2, payroll data will be expanded and used by other government agencies, including Services Australia.
The consequences of getting it wrong will be even more significant as it could mean employees may do an incorrect tax return, or their social security applications or COVID relief payments could be rejected.
While not getting STP right can have damaging consequences, it is also here to make employers and employees’ lives easier by reducing the burden of reporting to multiple agencies.
The question is how to simplify the compliance process and eliminate the fear of getting it wrong.
Business owners aren’t accounting experts
Becoming compliant with new regulations can be a struggle for small-business owners: they don’t have the same resources as large organisations and rarely have a full-time accountant to help them with staying on top of the rules.
In fact, most business owners will treat payroll as too important to delegate as they don’t want to risk mispaying their staff.
This means business owners are in charge of getting it right, while simultaneously being time-poor and often not 100 per cent confident they have the accounting skills or right technology to be fully compliant.
The good news with STP is that with the right ATO approved payroll software it is easy to meet STP obligations. Smal-business owners just need to cut through the plethora of software options and think about what matches their business’ specific needs.
Five tips to choose the right STP compliant software for your business
- Prioritise value for money and software that’s easy to use. There are many user friendly solutions for less than $10 per month.
- Don’t invest in features you don’t need: being able to enter penalty rates and track leave balances makes sense, but complex award interpretation might not be so important.
- Don’t compromise on strong customer support.
- Use software that lets you invite your accountant or bookkeeper so they can check what you’re doing and give you some peace of mind.
- Find a tool that aligns with your lifestyle. If you spend a lot of time out of the office or on your phone or tablet, find a solution that works well on those devices too.
Compliance doesn’t have to be a nightmare, but it takes the right technology to make it easy.