Single Touch Payroll (STP) has been sweeping through the Australian business and accounting community in recent months, demanding change and compliance for enterprises medium to large. This new reporting requirement is a significant step forward in the federal government’s “Digital by Default” strategy, and no doubt a win-win for both businesses and Australian workers.
STP is designed to streamline financial reporting and make the life of businesses a whole lot easier. For employers, they will no longer need to report their payroll in bulk at the end of the financial year. Not only will the new process drive efficiencies, it also reduces compliance costs. For employees, they can now monitor their most up-to-date tax and superannuation balances in real-time. Payroll information will be pre-filled in their tax returns, and salary statements are now permanently stored in myGov.
The benefits are palpable. Yet, a significant number of small businesses are still not STP compliant. Why is this so?
Some of the biggest obstacles preventing compliance with STP stem from the lack of education and awareness. Many small-business owners may not have the capacity and time to properly grasp what the new legislative measure means for them.
As a result, we have noticed a couple of common misconceptions that may be stopping them from jumping on the STP bandwagon.
1. “I am compliant, my software provider supports STP”: While all major accounting providers now support STP, it doesn’t stop when you’ve deployed your preferred vendor. Businesses must secure authorisation from the ATO.
2. “I have to report all of my data, I should clean them up first”: A new reporting standard does not necessarily equate to the need to report more data. Only certain types of deductions need to be reported to the ATO. Small businesses should make it a point to get up to speed on the latest tax rules.
The good news is that the ATO has allowed the first 12 months since the introduction of the new STP scheme to be a “transition phase”. This means that until 1 July 2019, employers with 20 and over staff will be pardoned from an administrative penalty when they do not report in a timely manner. A notice will be issued in the first instance, and only those who fail to rectify the situation after the initial warning will be penalised.
This access to real-time payroll information is a massive win for employeesas the ATO will be able to identify and penalise businesses who aren’t fairly paying their staff quicker than ever before.
But ultimately, this is only an indication of what is to come from the government’s overall digital strategy. We will see the rise of more simple, elegant and connected systems to manage complex interactions between business and government, gradually phasing out paper and non-electronic forms of dealings.
For one, we already know that e-invoicing is coming up. While this isn’t a direct government initiative, the ATO has been working closely with the Digital Business Council and major accounting software providers to develop an agreed standard that will pave way for an effective national electronic payment system. We are also seeing a revolution at the state-level, where in 2019, New South Wales will run a state-wide trial of digital drivers’ licenses.
As Digital by Default becomes more widespread, we can certainly expect more of such initiatives, and businesses who fail to adopt the relevant solutions will only end up at the back of the pack.
Sam Allert, Managing Director – ANZ, Reckon