Single Touch Payroll is an Australian Tax Office (ATO) initiative that was brought into play on 1 July 2019. It’s designed to enable total visibility over your payroll, and to ensure that all employers are meeting their tax obligations.
Single Touch Payroll changed the face of payroll reporting in Australia, and brought a new challenge to understanding your ATO obligations.
But it brought some benefits, too.
Contact your Liston Newton tax adviser today to discuss what Single Touch Payroll means for your business.
What is Single Touch Payroll?
Single Touch Payroll is a system that delivers real time reporting on all payment events directly to the ATO. This includes all salaries and wages, all allowances, reimbursements, deductions, PAYG withholdings, superannuation payments.
Single Touch Reporting is done through digitally compliant accounting software platforms such as Xero, MYOB, or QuickBooks.
How Single Touch Payroll works
Any time a business triggers a payment event (whether it’s salary payment, PAYG withholding, super payments, or otherwise) a report is automatically created and sent to the ATO. This report details each payment made to each employee, and is sent directly to the ATO every payday.
Given the regularity and comprehensive detail of these reports, Single Touch Payroll removes the need for annual payment summaries, and to provide payslips to staff. It’s effectively a payment summary report in miniature, for each pay event.
Employees can see payment information by logging in to their myGov portal and accessing this payslips and payment information there.
Registering for Single Touch Payroll
To register for Single Touch Payroll a business owner supplies the ATO with their accounting software ID number, ABN, and business ID information. This registration creates the connection between their payroll system and the ATO.
Most software platforms have the option to register for Single Touch Payroll. If not, contact your tax accountant to discuss your registration.
Who has to do it
From 1 July 2019, all businesses with employees on their payroll are required to comply with Single Touch Payroll.
Employers with 1 to 4 employees (micro-employers) are eligible to use low-cost solutions, which the ATO are looking at having software developers build. To be cost-effective for small businesses, these solutions are required to cost $10 per month or less.
Up until 30 June 2021 these small businesses have the choice of engaging a registered tax or BAS agent to report quarterly on their behalf.
Do business owners still need to submit a BAS?
This is a common question. In short, yes, a business owner still needs to complete a Business Activity Statement (BAS).
Single Touch Payroll is a separate obligation to BAS. BAS is focused on correct reporting of GST and PAYG withholding tax, whereas Single Touch Payroll is focussed on correct reporting of payroll obligations.
What Single Touch Payroll means for small business
Single Touch Payroll streamlines how businesses process their payroll reporting. It’s designed to automate employee superannuation, making the business automatically compliant with super stream payments.
Previously, a business would need to finalise their payroll at the end of the financial year and supply the ATO with:
- A payment summary annual report featuring full details of salary and wages, PAYG withheld, and super contributions
- A payment summary (previously known as a Group Certificate) for each employee, with all income details, tax withheld, and super contributions they'd received
With Single Touch Payroll both these reports are no longer required to be produced. Instead, this information is reported to the ATO every payday. Employees can access their annual payment information from their MyGov account.
Single Touch Payroll compliance
While Single Touch Payroll is reasonably straightforward to set up, failure to comply with this reporting method carries its own penalties.
The first 12 months of Single Touch Payroll, from 2018 to 2019, was considered a grace period by the ATO. During this time they didn’t issue administrative fines or penalties, they aimed instead to help build business knowledge of and familiarity with the system.
Now, however, penalties and fines are firmly in place for businesses who breach the ATO rules.
- For small businesses who are routinely and repeatedly late with their payments, the penalty rate is calculated at $210 for every 28 days that your report is overdue. This is up to a maximum of $1,050.
- Medium-sized businesses face a maximum fine of $2,100.
- Large entities face a maximum fine of $5,250.
- Global organisations face a maximum fine of $525,000.
- Penalties are also in place for presenting false information within your STP report.