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Single Touch Payroll Update – March 2019

Understanding Single Touch Payroll obligations

Single Touch Payroll (‘STP’) is a Government initiative aimed at cutting red tape for employers and improving visibility of compliance with business obligations such as:

  • salary and wages and similar payments;
  • Pay As You Go (‘PAYG’) withholding; and
  • certain superannuation related information;

by requiring ‘real time’ reporting of payroll information directly to the ATO.

Importantly, STP is designed to extract information that already exists in an employer’s payroll system.

As such, it is not intended to impose any additional burden on employers, other than requiring them to report the information to the ATO sooner.

From a practical perspective, businesses must use STP compliant software to comply with the new obligations.  This will necessitate updating or changing their current payroll software.

Generally, most payroll software providers will have already adapted their software to ensure the required reporting capability has been incorporated.

Once a business has adopted the appropriate software, ongoing reporting obligations should be dealt with as part of an automated software function.

Effectively, employers will send their employees’ relevant payroll information required under STP to the ATO each time they run their payroll and pay their employees.

Crucially, in complying with their STP obligations employers will not change their payroll cycle.

When a business reports to the ATO via STP, the relevant employees will be able to view their year-to-date tax and super information through myGov.

As a result of STP reporting, a number of ongoing compliance obligations for employers will be streamlined, and/or removed.  Some benefits for employers under STP include the following:

  • The removal of the need to issue an annual ‘Payment Summary’ to employees  for payments reported to the ATO via STP, provided an employer lodges a ‘finalisation declaration’ (i.e., generally by 14 July, although extensions are in place for the first year of STP implementation).
  • The removal of the need to lodge a ‘Payment Summary Annual Report‘ for payments reported through STP.
  • From 1 July 2019, STP will enable the pre-filling of BAS Labels W1 (gross salary and wages and other payments) and W2 (amounts withheld from salary, wages and other payments) for employers that are small or medium withholders.
  • The streamlining of employee documentation such as the lodgment of  ‘TFN Declarations’ and ‘Withholding Declarations’ via enabled software.

It is important to understand that STP does not impact or change when employers must actually remit PAYG withholding amounts to the ATO or make super contributions.  The new STP obligations simply affect when employers must report these payments to the ATO.

Original commencement date

STP commenced from 1 July 2018, for employers with 20 or more employees (i.e., substantial employers).

When determining whether or not the 1 July 2018 start date applied, an employer was required to do a headcount of the number of employees they had on 1 April 2018.

Broadly included in the headcount were all full-time and part-time employees, casual employees who worked at any time during March 2018, overseas employees, any employees absent or on leave (paid or unpaid) and seasonal employees.

Pending STP commencement date for small employers now law

Small employers (being those with less than 20 employees) are now technically required to commence their STP reporting obligations from 1 July 2019.

The intended STP obligations on small employers has only recently become law, with the Treasury Laws Amendment (2018 Measures No. 4) Bill 2018 finally being passed by both houses of Parliament on 12 February 2019.

This means that from 1 July 2019 all employers, no matter their size, will generally be required to comply with the STP reporting obligations.

The ATO says it will be writing to small employers who have 19 or less employees and already use payroll software to tell them about STP, and remind them that if their payroll software offers STP, they can update their software and start reporting now.

One-year exemption for closely held payees

The ATO has announced that closely held payees – such as family members – will be given a one-year exemption from STP reporting.

The exemption will be provided to closely held payees for the 2019-2020 financial year and STP reporting for these payees will now commence from 1 July 2020. The ATO is also exploring the possibly of a quarterly reporting requirement for these payees.

The ATO’s definition of a closely held employee is one who is a non-arm’s length employee, directly related to the entity from which they receive payments, including family members of a family business, directors of a company, and shareholders or beneficiaries.

The exemption recognises that payments made to closely held employees do not always form part of traditional weekly or fortnightly payroll processes.

The ATO will be looking to provide more details about how STP reporting will affect the closely held group in the coming months.

Solutions for micro employers without existing payroll software

The ATO has released a detailed register of STP products for micro employers (generally defined as businesses with one to four employees) who do not currently have payroll software.

There are six products that are currently available, namely by Cashflow Manager, ePayroll, Single Touch Pty Ltd, CloudPayroll Pty Ltd, AccXite Pty Ltd, and Free Accounting Software Pty Ltd.

All of the products have been priced at $10 or less per month with AccXite offering its product for free until 31 December 2019 before charging $10 a month. As its name suggests, Free Accounting Software’s product will be free.

Some of the major software players such as Intuit (QBO), MYOB, Xero and Reckon have all announced that they will be providing an option at $10 or less per month, with their products to be available between April and June.

The product register released by the ATO can be viewed here: www.ato.gov.au/Business/Single-Touch-Payroll/In-detail/Low-cost-Single-Touch-Payroll-solutions/

If you are currently not using an accounting software package please speak to your accountant for advice in choosing the most appropriate package for your needs.

Flexible ATO implementation

The Commissioner of Taxation, Chris Jordan,  recently made a personal guarantee that the ATO’s approach to STP will be “flexible, reasonable and pragmatic”.

In particular, despite the 1 July 2019 start date for small employers, the Commissioner has stated that they can start STP reporting any time from 1 July 2019 to 30 September 2019.

This effectively provides a three-month implementation reprieve for small employers.

The ATO has also indicated that there will be no penalties for mistakes, missed or late reports for the first year and exemptions will be provided from STP reporting for employers experiencing hardship, or in areas with intermittent or no internet connection.

We recommend that you check for the STP update to your existing payroll software.  We remind our QBO users that STP is ready and available for use. Please contact us if you require assistance activating STP in your payroll program or if you need any other help navigating this new reporting framework.

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Changes to Small Business Instant Asset Write-off

On 29 January 2019, the Prime Minister announced that legislation will be introduced to:

  • extend the small business instant asset write-off by 12 months to 30 June 2020; and
  • increase the write-off threshold from less than $20,000 to less than $25,000 (effective immediately).

The current threshold of $20,000 has applied since 7.30pm AEST on 12 May 2015 and was due to revert to $1,000 on 1 July 2019.

Under the proposed changes, from 29 January 2019 until 30 June 2020, small businesses with an aggregated annual turnover of less than $10 million may claim an immediate deduction for the business-use portion of each depreciating asset costing less than $25,000.

Example

To illustrate, assume an individual acquires a van for $22,000 (excluding GST entitlements) on 1 February 2019.

The individual is a small business entity and estimates the van will be used 90% for the business and 10% for private purposes.

Under the current rules, while the business-use portion of the cost of the van is less than $20,000 (i.e., $22,000 x 90% = $19,800), an immediate deduction is not available because the entire cost is $20,000 or more. 

However, the van may be depreciated as part of the taxpayer’s SBE small business pool.

In contrast, an immediate deduction of $19,800 may now be claimed under the proposed changes, as the entire cost of the van is below the new threshold of $25,000.

This measure is expected to benefit more than 3 million eligible small businesses.

Please note at this stage the Treasury Laws Amendment (Increasing the Instant Asset Write-Off for Small Business Entities) Bill 2019 has not been passed by Parliament.

Should this Bill become law, it will open up opportunities for small businesses to claim an immediate deduction for depreciating assets (where they cost less than $25,000) up until 30 June 2020.

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Superannuation Amnesty Blocked – ATO Waives Penalties

The ATO has confirmed it will waive penalties for businesses who voluntarily disclosed underpayment of superannuation in the wake of the ‘botched’ superannuation guarantee amnesty.

The amnesty was a federal government initiative that encouraged employers to ‘wipe the slate clean’ and pay workers their unpaid super entitlements. It proposed a waiver of the administration component, Part 7 penalty and the tax deductibility of all catch-up payments during the 12 month amnesty period.

But the amnesty failed to get through parliament meaning the tax office will now use it’s discretion to waive penalties for employers that came forward thinking they could apply for amnesty.

“Consistent with our existing approaches in other instances where people come forward voluntarily, when we receive these superannuation guarantee notifications, the fact that they have come forward to the ATO is a strong consideration in the level of discretional penalty applied”, an ATO spokesperson stated.

“In relation to superannuation guarantee, the ATO only has the discretion to remit the Part 7 penalty. With regard to those taxpayers who made a voluntary disclosure in anticipation of the proposed amnesty, we will remit the Part 7 penalty in full.”

Employers will still have to pay the superannuation guarantee they owe to their employee, the interest amount, and the $20 administration component per employee per quarter.

If you have self-reported and need assistance in this area please contact our office for advice.

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Superannuation Guarantee Amnesty Still Pending

The proposed superannuation guarantee (‘SG’) amnesty is a one-off, 12-month opportunity to self-correct past non-compliance (i.e., from 24 May 2018 to 23 May 2019).

It will apply to previously undeclared SG shortfalls for any period from 1 July 1992 up to 31 March 2018.

The ‘carrot’ currently on the table is that employers who voluntarily disclose previously undeclared SG shortfalls during the amnesty (i.e., importantly, before the commencement of an ATO audit) will:

not be liable for the administration component and penalties that may otherwise apply to late SG payments, and

be able to claim a deduction for catch-up payments made during the relevant 12-month period.

This means that employers will still be required to pay all employee entitlements, including any unpaid SG amounts owed to employees and the nominal interest, as well as any associated general interest charge.

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Personal Income Tax Cuts

Parliament has passed the Government’s Personal Income Tax plan, meaning that the first stage of the proposed income tax cuts will start to take effect from 1 July 2018.  As a result of these tax cuts, all employers are advised that the current Pay as you go (PAYG) withholding tables have been updated. Please refer to the new rates at www.ato.gov.au/Rates/Tax-tables.

The Government’s Personal Income Tax plan has three steps:

  1. The Government will introduce the Low and Middle Income Tax Offset (in addition to the Low Income Tax Offset) from 1 July 2018, being a non-refundable tax offset of up to $530 per annum to Australian resident low and middle income taxpayers (apparently over 10 million taxpayers will get at least some tax relief from this new offset in 2019 income year).

The offset will be available for the 2019, 2020, 2021 and 2022 income years and will be received as a lump sum on assessment after an individual lodges their tax return.

  1. Lifting tax brackets, to protect Australians from the impact of ‘bracket creep’, as follows:

– From 1 July 2018, the top threshold of the 32.5% personal income tax bracket will increase from $87,000 to $90,000.

– From 1 July 2022, the 19% personal income tax bracket will increase from $37,000 to $41,000, and the top threshold of the 32.5% personal income tax bracket will further increase from $90,000 to $120,000.

The low income tax offset will also be lifted to $645.

  1. The 37% tax bracket will be removed entirely from 1 July 2024, and the top threshold of the 32.5% personal income tax bracket will be increased from $120,000 to $200,000.
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Highly Anticipated STP Law Secures Passage

Single Touch Payroll (‘STP’) will now cover businesses of all sizes after legislation was passed by the Senate to expand the STP framework to employers with 19 or less employees from 1 July 2019.

It is estimated an additional 700,000 employers will enter STP as a result of the new law, joining the 73,000 employers with 20 or more employees who commenced STP on 1 July 2018.

The ATO acknowledges there is a large number of very small employers who have less than five employees (‘micro-employers’) who do not currently use a payroll product and has indicated that they are not looking to force them to take up a product to comply with STP. Efforts are being made to work with industry to look at some alternate reporting mechanisms and flexible options to help transition micro-employers to STP over the next couple of years.

In preparation for the rollout across all businesses, the ATO sought expressions of interest from digital service providers to provide low cost STP alternatives such as mobile apps, simple reporting solutions or portals.

The ATO has now published a list of 24 companies intending to provide such solutions, with the list to be updated further this month to include information about the products these companies will offer. Intuit, MYOB, Xero and Reckon have each put forward product proposals.

The ATO does not realistically expect that everyone will start STP from 1 July 2019 and has indicated that it will be flexible with the commencement date, including the provision of deferrals to help stagger the uptake. Employers who are in an area that has internet issues or challenges are reminded that there are potential exemptions available under STP.

This is a positive message from the ATO, particularly for micro-employers. Hopefully, together with the relevant software developers, they are able to come up with a low-cost and simple alternative for those who do not currently use payroll software to comply with their STP obligations.

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Single Touch Payroll Update

Single Touch Payroll (STP) is a new reporting framework requiring employers to provide payroll and superannuation information to the Australian Taxation Office (ATO) as and when employees are paid.

The framework represents a significant change for business, both in the way that employers report and the level of detail being shared with the ATO and we remind businesses of the importance of checking their current HR practices and procedures.

Once an employer starts reporting, employees will be able to access payroll and superannuation information via ATO online services. Employees should also be aware there may be changes to the way employers issue payment summaries.

The start date for ‘substantial’ employers with 20 or more employees is 1 July 2018 and employers with 19 or less employees will be included from 1 July 2019.

All employers are required to count the number of employees on their payroll on 1 April 2018 to find out if they are a substantial employer (note that this can be done after 1 April, but they need to count the employees who were on their payroll on 1 April).

They must count each employee (not the full time equivalent), including full-time, part-time and casual employees, as well as those employees based overseas or absent or on leave (paid or unpaid).

Employers that are part of a company group must include the total number of employees employed by all member companies of the wholly-owned group.

However, employers don’t have to include the following in the headcount:

• any employees who ceased work before 1 April;
• casual employees who did not work in March;
• independent contractors;
• staff provided by a third-party labour hire organisation;
• company directors or office holders; or
• religious practitioners.

Note that, although directors, office holders and religious practitioners are not included in the headcount, if the employer starts reporting through STP, the payment information of these individuals will need to be reported (because the payments are subject to withholding and are currently reported in the Individual non-business payment summary).

Employers don’t need to send the ATO the headcount information, but they may want to keep a copy for their own records.

Once an employer becomes a substantial employer, they will need to continue reporting through STP even if their employee numbers drop to 19 or less (unless they apply for and are granted an exemption).

We have provided a checklist for our business clients to help prepare for Single Touch Payroll and ask that you contact us as soon as possible if you require further assistance.

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Single Touch Payroll Start Date is Looming for ‘Substantial’ Employers

Single Touch Payroll (STP) is a new reporting framework that requires employers to provide payroll and superannuation information to the Australian Taxation Office (ATO) as and when employees are paid. STP aligns payroll functions with reporting obligations and employers who fully report will not have to comply with a number of existing obligations.  STP will be mandatory for ‘substantial’ employers with 20 or more employees from 1 July 2018 and will be expanded to include employers with 19 or less employees from 1 July 2019. The framework represents a significant change for business, both in the way that employers report and the level of detail being shared with the ATO.

What will change under STP:

  • Salary and wages, allowances, deductions and PAYG withholding will be reported to the ATO in ‘real time’ when payroll is periodically processed at each pay run.
  • Superannuation liability will be reported at each pay
  • Employers will be required to use STP enabled
  • STP reports will become the approved form for reporting PAYG withholding, and from 1 July 2019 the ATO will pre-fill amounts on the
  • Employers will not have to submit an annual PAYG report to the
  • Employers will no longer be required to provide payment summaries as employees will be able to access their information via a myGov

What will remain the same:

  • The due date for PAYG withholding and superannuation
  • The requirement for employers to provide employees with
  • The timing of your pay cycle – employers can continue to pay employees weekly, fortnightly or

Getting Ready for Single Touch Payroll

Step 1: Find out when you need to comply

Mandatory reporting will start from:

  • 1 July 2018 for businesses that employ 20 or more people, and
  • 1 July 2019 for businesses that employ less than 20 people.

  Count your employees. A headcount is required as at 1 April 2018.
The table below will tell you who to include:

Employee-Headcount

  Check if your payroll software has a deferred start date. Some payroll software providers have asked the ATO for more time. If granted, the deferral will apply to existing customers of the specific software version.

Step 2: Connect your business systems

Employers will need to use STP enabled software.

  Find out if and how your existing payroll software provider will offer STP reporting. You may need to choose a new payroll provider if you currently report on paper or your existing provider will not offer STP.

Step 3: Review your payroll processes

STP means real-time reporting of payroll, PAYG withholding and superannuation to the Government and its associated agencies:

  Check your HR practices and procedures including PAYG, superannuation, leave allowances, timeliness of payments and
compliance with the Fair Work Act 2009 – visit www.fairwork.gov.au

Step 4: Start reporting your payroll

  You can start reporting as soon as your software is available and before the mandatory start time, if you wish.

QBO and Single Touch Payroll:

QBO will support STP reporting. The changes are currently under development.
There is no estimate on when STP reporting will be available, however it will be ready for use before 1 July 2018.

If you need help:

If you have concerns or require assistance in relation to any aspect of Single Touch Payroll please contact our office. We also recommend the ATO website which is regularly updated with STP information: www.ato.gov.au/Business/Single-Touch-Payroll/

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Extension of the SBE Immediate Deduction Threshold

In the 2017/18 Federal Budget handed down on 9 May 2017, the Federal Government announced that it intended to extend the ability of Small Business Entity (or ‘SBE’) taxpayers to claim an outright deduction for depreciating assets costing less than $20,000 until 30 June 2018. This Budget Night announcement has now been passed into law.

To qualify for an immediate deduction for depreciating assets purchased by an SBE taxpayer costing less than $20,000, the asset needs to be first used or installed ready for use on or before 30 June 2018.

The ‘aggregated turnover’ threshold to satisfy the requirements to be an SBE taxpayer has increased from $2 million to $10 million, as of 1 July 2016. As a result, more business taxpayers than ever before will be eligible for the $20,000 immediate deduction for depreciating assets.

Please contact our office if you need any assistance in determining if your business is an SBE, whether an asset purchase you are considering will qualify as a “depreciating asset” and/or what constitutes being “used or installed ready for use”.

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Client Portal

Many of our clients now prefer receiving correspondence via electronic methods. As a result we have reviewed our delivery methods and introduced an online client portal.

The online client portal will improve the way we exchange information with our clients. The client portal is convenient, efficient and secure.

The client portal allows you to access and retrieve your tax and accounting information, whenever you need to.

Importantly, it also offers industry best practice high level security and is the recommended method for sharing information online.

Using your own secure login the client portal allows you to view, digitally sign and return your documents – at the click of a button!

Your accountant will discuss portal activation with you during this tax year.

If you have recently started using or you are about to begin using our client portal, please refer to the information sheet we have included on the portal page on our website. You might like to print them out and keep them close by as you start navigating the portal!

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