Single Touch Payroll (STP) legislation has passed, meaning businesses of all sizes are required to submit payroll data every pay run as of July 1 this year. The change will see Australia’s 782,000 businesses with 19 employees or less required to report via STP-ready software. So what does this mean for small businesses with few employees and no existing software provider? Here are the five fundamentals you need to know today.
1. What is STP and how does it impact small businesses (<19 employees)?
STP requires businesses to lodge payroll reports with the ATO every time they complete a pay run – instead of creating one large report at EOFY. The aim is to improve overall efficiency and transparency in payroll reporting.
From July 1, employers with any number of staff will need to report payments such as salaries and wages, PAYG withholding, and super information electronically to the ATO directly from their payroll program whenever they pay their employees. Thus, employers won’t need to complete payment summaries for their employees at EOFY as payroll information is reported to the ATO at regular intervals throughout the year.
2. Removing manual payroll saves time and means fewer errors and disputes
If you’re running a small business with 19 or less employees, there’s a chance you’re still managing your payroll using spreadsheets or paper. While this may feel like a low-cost (but not pain-free) solution, it’s costing your business more than you think.
Tech-savvy small-business owners have realised the efficiencies offered by online accounting and payroll software. After onboarding and setting up employees in your online accounting program, payroll becomes an automated process of reconciling accounts, preparing payment summaries and reporting through to the ATO.
Manual reporting takes significantly longer, with increased risk of error costing more time and money to rectify.
3. Automated payroll alternatives cost you less
If you’re currently using online accounting software then you already know that technology can save you lots of time and hassle.
The same applies to payroll. New payroll management software does away with time-consuming processes and STP reporting is soon to be more affordable than ever, beginning at around $10 per month for businesses with four employees or less. While you may think you’re saving some money without payroll software, it could be a costly mistake.
4. Switching to Single Touch Payroll early removes tax-time headaches
A little time setting up STP reporting now will make your payroll run much smoother come tax time. Sending the ATO payroll information each time you run a pay cycle significantly reduces margin for error.
STP payroll will also reduce errors employers may make when paying superannuation. Most employers want to do the right thing by their employees and a lot of underpaid super is done in error. With STP, the ATO will be able to match up statements with the employees’ super provider. If there are any discrepancies between the two statements, they’ll alert you.
Because the ATO will be able to check what’s going on more regularly, alerts about underpaid staff or super contributions can reach you faster.
5. There are solutions specifically catering to smaller businesses (think < five employees)
Manual fortnightly reporting could become cumbersome, so a number of STP-ready payroll solutions have been introduced to the market at a lower price point, specifically for small businesses.
Investigate your options today, so you’re ready ahead of 1 July.
Dale Dixon, Head of Product – SME, MYOB