WHAT THE TAX?!!

Single touch payroll for everyone?

Single Touch Payroll (STP) has been introduced into the Australian tax system to combat areas of taxpayer non-compliance of PAYG withholding and superannuation guarantee obligations. Past legislation has been enacted which brings this new payroll system into commencement from 1 July 2018.

Currently as it stands, only "substantial employers" will be necessary to implement STP (TAA 1953 s 389-5). However, new legislation has been tabled in parliament that will mean that every employer will be required to use and lodge STP software. On enactment, all employers will be required to use STP from 1 July 2019.

Headcount

A "substantial employer" is one who employs 20 or more employees, or is a member if a wholly-owned group, and the group has 20 or more employees in total. Contractors and other individuals that are employees under the extended meaning of "employee" in the Superannuation Guarantee (Administration) Act 1992 are excluded from the headcount if they do not meet the ordinary meaning of employee. A checklist on whether an individual is an employee is available here.

The headcount, which determines whether an employer is a "substantial employer", must be undertaken as at 1 April 2018.

Headcount, as defined by the ATO, is as follows as at 1 April 2018:

          • full-time employees

          • part-time employees

          • casual employees who are on the payroll at 1 April and worked at any time during March

          • employees based overseas

          • any employee absent or on leave (whether paid or unpaid), and

          • seasonal employees (if necessary).

Do not include any independent contractors or staff that is provided by a third party labour hire organisation. Also, company directors are not included unless they are also employees.

This reporting will continue indefinitely even if the employer goes below 20 employees during the 2018/19 income year.

Reporting requirements

Employers will need to report the following through their payroll system:

          • payments made to individuals and amounts withheld from those payments

          • payments of salary or wages and ordinary time earnings (OTE), and

          • employee superannuation contributions.

Also, pending the passing of new legislation, other amounts such as "sacrificed ordinary time earnings amounts" and "sacrificed salary and wages amounts" will be reportable. The objective of these additional reporting requirements ensures that superannuation guarantee is not reduced by amounts salary sacrificed. These amounts, along with ordinary time earnings and superannuation contributions can be reported either separately or combined. Either way, the ATO has stated that they will be aware of an employee's overall package from which they work out their superannuation guarantee.

Payments not made through the payroll system (eg contractor payments, payments of superannuation income, payments of dividends, interest and royalties, etc) are excluded.

Employers will not be subject to administrative penalties for the first 12 months, unless first notified by the Commissioner.

PAYG payment summaries

For employers who are required to use STP from 1 July 2018, there will no longer be a requirement to provide employees with PAYG payment summaries at year end.

Essentially, the employees will be able to see their payment summaries at year end online from myGov and also they will be available on the Tax Agent Portal.

Information sourced using CCH iknow