Streamlined tax and super reporting for SMEs is on its way

SMEs are going to hear a lot about something called STP – Single Touch Payroll – in the coming year. It’s a system the federal government hopes will streamline business tax and superannuation reporting and save costs for SMEs. Fingers crossed!

Let’s be clear about this: STP will be a major change for SMEs.

SMEs will have heard a little about the scheme already but the pace will ramp up during 2016. The original proposal to introduce STP was to have it start on July 1, 2016, but SMEs told the government that was not achievable. So it has been put back a year till June 2017.

Employers currently manually report Pay-As-You-Go (PAYG) withholdings to the Australian Taxation Office, but under the new STP system, this information will be automatically reported to the ATO through Standard Business Reporting (SBR) software.

Reporting of superannuation contributions will also be automatically sent to the ATO when payments are made. However, the requirement for reporting super contributions to funds under SuperStream will not change with the introduction of Single Touch Payroll. In addition, employers will also have the option to pay their PAYG withholding at the same time they pay their staff.

If all goes well, the change will eliminate the need for employers to report employee-related PAYG withholding in their activity statements throughout the year and employee payment summaries at the end of the year.

The government is also introducing streamlined processes for individuals commencing employment. Individuals will have the option of completing their Tax File Number (TFN) declaration and Superannuation Standard Choice forms using myGov or through their employer’s business management software.

The ATO will be conducting a pilot of STP in the first half of 2017 focusing on small businesses.

The plan is that from July 1, 2017, all businesses will be able to commence STP reporting, with the option to make voluntary payments. In addition, the ATO will transition employers with 20 or more employees to STP.

From July 1, 2018, employers with 20 or more employees will be required to use STP-enabled software for reporting to the ATO. The government says it will make a decision on timing for rolling out STP reporting for employers with less than 20 employees after the pilot is completed.

To assist small businesses with a turnover of less than $2 million, the government will offer a $100 non-refundable tax offset for SBR-enabled software. This offset is proposed to apply from July 1, 2017, and for software purchases or subscriptions made in the 2017-18 financial year only.

But some action is also likely this year. In the first half of 2016, the ATO says a new law to support STP will be drafted and released by the government for consultation.

Consultation will also continue with software developers on the STP requirements. In addition, the ATO said it will continue to engage with the community to enable a successful transition and to develop support options.

The government is keen to ensure there is widespread consultation with businesses on the changes and has already undertaken extensive consultation. Feedback has indicated that most businesses require 12-18 months in lead-time to successfully implement the changes.

The ATO is testing the following with small business owners:

• compulsory real-time reporting direct from payroll software when events such as paying wages occur; and
• options to voluntarily make real-time payments for withholding and super guarantee when wages are paid.

The ATO says its feedback shows there is general support for real-time reporting.

It is now clear STP will happen; not if, but from, July 1 2017, barring any major hiccups. SMEs should be actively considering the implications now. 

Terry Hayes is the editor-in-chief of tax news reporting at Thomson Reuters, a leading Australian provider of tax, accounting and legal information solutions.