You may or may not have heard of Single Touch Payroll, or STP, which is an initiative that was introduced by the ATO a few years ago. The ATO is continuously expanding the STP system to capture more data, and we sat down with Melanie Fanor, one of our superstar Senior Accountants, to ask her a few questions about STP and what it means for businesses.
What is Single Touch Payroll, and why is it important?
Single Touch Payroll aims to streamline the reporting of wages, tax withheld and superannuation to the ATO. It enables real time reporting through STP-enabled software, such as Xero. This has eliminated the need for employers to prepare year end payment summary reports and yearly payment summaries.
The key aspects of the Single Touch Payroll system are:
- Employers must report via Single Touch Payroll after every pay run.
- Employees can access their year-to-date tax and superannuation information by logging in to myGov at any time.
- Employers no longer have to report to multiple government agencies; this information is available online through the different government agencies.
Who needs to comply with the Single Touch Payroll reporting requirements?
All employers need to report through STP each time they pay employees. The transitional period and concessions provided by the ATO ended on the 1st of July 2021.
It is now mandatory for all employers to report via STP. Exemptions are only available in limited circumstances.
Micro Employers (between 1 and 4 employees):
- Can use the no cost and low cost options for their STP reporting.
- May be eligible to report quarterly if experiencing exceptional circumstances.
Businesses with irregular employment patterns, such as seasonal employers may also be eligible to report quarterly.
How can employers use Xero to implement the Single Touch Payroll changes as they come through?
Xero has brought in changes to its payroll capabilities over the last four years to enable businesses to comply with Single Touch Payroll.
STP Phase 1: reporting via STP
Most employers will now be familiar with the payroll functions implemented by Xero for STP phase 1. Some examples are:
- Submitting employee TFNs via the tax file number declaration function
- Submitting and filing each pay run to the ATO via STP
- Finalising payroll at year end and submitting to the ATO via STP
STP Phase 2: employee profiles
Under STP phase 2, more detailed reporting will be required from employers. Xero has updated the employee set up process to include:
- Employees TFNs will now be incorporated via STP reporting, eliminating the need to submit the tax file number declaration
- Employment types – whether the individual is an employee or contractor
- Income Type – how the individual is paid, such as salary and wages
- Tax Scale – the PAYG scale that determines how much tax should be withheld
If you have any questions in relation to Single Touch Payroll and how using Xero can ensure your payroll processes are efficient, please get in touch with us at HTA!
