What is Single Touch Payroll?
It is the reporting of all wages and associated on costs such as superannuation directly to the ATO at the same time the employees are paid.
An employer who has 20 or more employees as of 1 April 2018; or is a member of a wholly owned group with 20 or more employees across the group as of 1 April 2018 will be required to comply with Single Touch Payroll reporting from 1 July 2018.
For employers or members of a wholly owned group with 19 or less employees will not be required to comply with Single Touch Payroll reporting until 1 July 2019, however can start reporting from 1 July 2018.
These new laws together with previously introduced laws dealing with “lockdown” director penalty notices See https://dyeco.com.au/director-penalty-notice-dpn/ are clearly focused on providing the ATO with more accurate and timely information to enable them, inter alia, to monitor and recover outstanding taxation liabilities more effectively.
What employees are included in the headcount?
All employees, whether full time, part time or casual are included which includes directors and related parties. Casual employees that worked during March 2018 and are still on your payroll as at 1 April 2018 must be included. It is just the number of employees without reference to full time equivalence.
Any employees that are currently absent or on leave are also included, along with employees based overseas.
What must be reported?
All salaries and wages including the remuneration of a company director. Termination payments, leave payments, return to work payments amongst other things, all of which can be found at https://www.ato.gov.au/Business/Single-Touch-Payroll/.
Notably if you are required to report based on 1 April 2018 headcount you remain liable to comply even if the numbers subsequently drop below 20.
Notably STP will remove the requirement to issue PAYG Summaries or for those still calling it by its really old name, Group Certificates.
Is your client really ready?
Some of the impacts of single touch payroll extend beyond the reporting requirements and compliance with the STP legislation.
The impact of STP is that the ATO will have all of the data relating to the company’s payroll status including all its PAYG status and SGC status. There will be no delay in reporting the obligation.
Whilst most businesses will not be materially affected, those that have previously relied upon the delay in the ATO reporting, compliance with PAYG and SGC obligations to fund its ongoing activities will need to find another source of funding or they may be issued with Statutory Demands and Director Penalty Notices in respect of their obligations sooner rather than later.
Further the ATO will have more accurate information when the tax payer is seeking extensions or payment arrangements in respect of their taxation obligations which may result in such requests being denied.
Insolvent Trading and Safe Harbour
A director may be personally liable for the debts incurred whilst allowing a company to continue to trade at a time when it is insolvent. In many instances the first signs of insolvency of a company is its inability to meet its obligations to the ATO. This arises for a number of reasons including delayed reporting requirements. The shift to STP is likely to limit the ability for a company to get substantially in arrears with the ATO and may force directors to revisit their cashflow and funding of their operations. This is very much a positive shift.
It may also have the effect of making directors consider their positions in a much timelier manner and those that have previously relied upon the “funding” provided by the ATO may seek advice in a timelier manner. Again, this is a very positive shift as many of the businesses that we liquidate may have been salvageable had the directors sought our advice when the company first started experiencing financial distress.
As you may recall we have been espousing early intervention for companies in financial distress for a very long time. A recent article on the Safe Harbour reforms https://dyeco.com.au/safeharbouractearly/ reiterated our continuing view. It may very well be that for clients that find themselves in financial difficulty either from the newly introduced STP reporting requirements or by other means may seek to take advantage of the safe harbour mechanisms and potentially avoid a voluntary administration or liquidation of the company.
As stated in the article in order to access the safe harbour exception employers need to have their employee entitlements up to date and have their ATO lodgements and reporting requirements up to date. The introduction of STP can only assist companies in those requirements being met and thus the ability for directors to seek Safe Harbour protections.
For your Consideration
- Determine which clients are required to report via STP from 1 July 2018 or 1 July 2019.
- Ensure your Payroll / Accounting Software is ready for the change.
- Prepare for the STP reporting regardless of start date.
- Consider possible data matching between the ATO and SRO/OSR depending on which state you are in.
- Consider any potential cash flow and funding impact including identifying clients that may have previously relied on ATO “funding” and discuss their future funding options and requirements to ensure that they can remain solvent and compliant.
- Consider if the company has any immediate solvency issues and consider if Safe Harbour advice and protection may be available.