Key Terms and Issues
Small, Micro and Closely Held Employers
Small or Micro or Other
For Single Touch Payroll (STP) the definition of a “Small” employer is one with 19 or less employees.
Small employers may consider each of the following ATO strategies for reporting STP:
- Quarterly Reporting (In line with the BAS)
- Low Cost Reporting Solutions ($10 and under software)
- Deferrals and/or exemptions (too hard come back later)
- Simplified reporting requirements (less information to report)
ATO presentations have stated that quarterly reporting would only be available to the micro (1–4 employee) businesses. However, if a disconnected (no internet or no computer capacity) employer was able to report quarterly rather than seek an exemption, ICB are confident the ATO would accept this arrangement.
Irregular employment patterns (e.g. seasonal only) may be eligible for exemptions as well as those with no or unreliable internet or computer capacity.
To access these concessions for STP the employer must ensure:
- Any amounts owing to the ATO are either not yet due for payment or subject to a payment plan, and
- All lodgement obligations are either not yet due or subject to a deferral
How to Apply for Quarterly Reporting
A BAS Agent can apply for quarterly reporting of STP on behalf of an employer who has 1–4 employees and has limited digital capability, however the employer must meet one of the following:
- a non-computerised business; or
- a business that has irregular employment patterns; or
- is an employer of closely held payees
The employer must meet both of the following:
- All amounts owing to the ATO are either not yet due or subject to a payment plan; and
- All lodgement obligations are either not yet due or subject to a deferral
The BAS Agent can apply for STP quarterly reporting via Online Services for Agents, by selecting from the menu Business then STP deferrals and exemptions. See below screen shot to guide you.
Additional Concession – Closely Held Employers
The concession for closely held employers relates to an employer who employs family or related people. The concession allows that the salary can be finalised at the same time as the tax return. Hence in some cases the final pay event would be finalised as late as June the following year.
This concession recognises the reality faced by family owned businesses.
The quarterly lodgement system (described above) will be permitted for these businesses. The family business will need to make a “reasonable estimate” each quarter of the amount to be paid to the relevant employees and tax withheld.
Other employees of these businesses will need to have payments reported in line with normal STP requirements.
STP Lodgements Timetable
|Type of Payroll||When to Lodge||Authority to Lodge||Conditions|
|Outside the normal payrun
||Terminations, Back Pay, PPL, Workers Compensation, Bonus and other.
|Same pays each payrun and/or same process but varying hours
||12 month authority
||If employer has
- no ATO debts
- no director penalty
Closely Held employees
(Prepare with BAS)
The business must still provide payslips for employees either using accounting software or by entering and lodging via a product such as GovReports. There are options for a cheap versions of payroll reporting software for small businesses. STP does not negate all of the other requirements associated with doing the payroll.
Contractors processed through a payroll system for superannuation or voluntary agreements payments should be classified as a non-employee which will remove them from the STP lodgement.
Before Implementing STP
Engage with the Employer
Ensure that you are “engaged” by your employer to provide a transition to STP and operational assistance.
- Ensure they are aware of this change to payroll (provide them with the ICB Business Information Sheet)
- Your engagement letter needs an additional clause about your involvement and to establish the ongoing communication from the employer to you, that complies with the employer's obligations under STP
- ICB engagement letter updates for STP are available from ICB member resources.
Who can do STP?
The TPB has confirmed that STP reporting is considered a BAS Service, therefore BAS Agents and Tax Agents may perform this reporting on behalf of their clients.
The employer or their authorised employee may also report on behalf of the employer.
A bookkeeper or a payroll service provider who is not a registered Agent may not liaise with the ATO, and therefore can't lodge reports directly on behalf of the client. They may however provide a different service where the employer is making the declaration and the service provider technically facilitates the lodgement.
Can I Run Two Different Payroll Systems for My Business?
Yes. Each payroll system will have a unique BMSID (Business Management System Identifier). Each BMS can submit pay events for the same ABN and even the same employee (if they are paid by both) and can be “finalised” in both. The ATO will accept two final sets of data from the same employer.
How Do I Swap Payroll Systems?
As noted above, each payroll system will have a unique BMS ID.
If you swap systems, then either
- Zero out all the balances in the old system and send an “update” event to the ATO which will Zero out all the employee balances from that system, and then
- Bring the YTD values into the new system and either send an “update” to bring the ATO up-to-date from the new BMS ID or send a pay event which will provide the information.
- Finalise the YTD balance in the old system, and then
- Start from zero in the new system.
ICB recommends that before implementing STP that a full reconciliation of wages is done, the same as you would do for end of year reconciliations. This is to ensure you capture any anomalies and to understand the YTD wages sent to ATO. Refer to ICB Resource – Reconcile Wages and PAYGW
Payroll STP Setup
Payroll Software Setup
- Ensure all the employee details in the software are complete
- Full name and address
- Date of birth
- Start Date
- Review each payroll category to ensure they have been allocated to the ATO categories, see below, and that the system captures the relevant information for each employee each pay run:
- Gross Salary & Wages
- Allowances (Under STP allowances are to be grouped and reported by category, see below)
- Deductions (STP allows the reporting of each type of deduction)
- PAYG Tax withheld
- The amount of superannuation accrued
- Could be just the SG component,
- Could be salary sacrifice super for RESC
What Do I Do When I Start?
- You must follow any transition steps that your software requires for you to ensure your existing payroll system will provide the right data in the right fields when the information is being submitted to the ATO. These steps may include:
- Mapping of payroll fields into STP fields
- User authority – set up the system so that only the authorised persons can make the lodgement.
- Agents are to be identified in the system. Ensure you have you own personal login as the Agent.
- Software should be connected to the ATO:
- Via ATO Access Manager a connection to your software company will require you to enter in the Software code (Cloud Authentication using the Device Auskey) – refer to ICB Resources
- Your software may require you to interact using the business Auskey in the business payroll software (a direct connection)
- Your software may create an STP file which will require you to arrange another service enabling lodgement – ICB will advise when we are aware of a valid service for you.
- You may have to export a report from one software and import it (or rekey) it into another, i.e., GovReports
- You will need an internet connection at the time of submission.
If You Start STP During the Payroll Year
- The first STP lodgement will lodge all employees in the payrun with their YTD figures thus far. It is however recommended to check with your software company, as you may be required to do additional tasks to bring in the YTD figures.
- Employees not in the first STP lodgement may lodge with the next STP event depending on your software, or you may be required to run a zero payrun if the employee is not working for the rest of the year
- Terminated employees may require either a zero payrun to activate STP lodgement or you may be required to lodge a Payment Summary Annual Report (PSAR) for 2019. It is recommended you check with your software to determine if terminated employees are activated in the STP lodgement process.
- Run your normal business process for the payrun
- If you don't have an annual authorisation, you will need to obtain a declaration or authorisation from the employer to be able to submit the STP report (refer ICB Resources), either
- when they provide you with the information to run the pays, or
- when you have completed the pays and they sign off (our recommendation)
- As part of your normal payroll process your software should:
- send the STP information to the ATO, or
- create the STP file to be sent, or
- allow you to obtain a report from the system for alternate lodgement
- Ensure the information has been sent (we expect you should simply send each time you do a pay run) your software should provide a submission date and time stamp as well as recording a receipt number from the ATO.
Correcting a Pay
- It’s important to remember that the employers' payroll system is the source of truth
- Correct the pay in the pay system then either:
- Send an “update” event to the ATO that will update the ATO data for that employee, or
- Wait until next pay run for that employee (as it will then provide the ATO with the corrected YTD values)
MyGov for Employees
All employees are encouraged to register for a myGov account if they wish to review their income statement (previously named Payment Summary) sent via the ATO.
If the employee cannot access myGov etc., the law allows them to be directed to the ATO requesting an income statement to be issued by them. In reality it makes sense for employers to provide a pay report for the end of the year during the transition.
Employee information will be available as prefill into the various income tax preparation platforms for their tax returns to be completed, i.e., myTax or Tax Agent Software.
An example of myGov Income statement and a payroll report as a comparison for the employee (this is updated each payEvent so is visible to the employee as an ongoing YTD report)
Future for STP
With STP reporting, superannuation guarantee accrued will be reported to the ATO each pay event. Superannuation funds are required to report to the ATO superannuation payments made by employers. This ability to crosscheck data will highlight to the ATO employers not paying or late paying employees' super.
Complete the W1 & W2 fields in the same manner as before STP. Specifically, the W1 & W2 you complete in the BAS should be based on the current or corrected values that are in the employer's payroll system.
Future implementation may allow for prefilling of W1 & W2 based on STP reporting, but we are not there yet. At this point best practise would suggest that a reconciliation between prefill amounts and payroll reports for the period would be required.
If I Correct Prefill BAS What Else Do I Have to Do?
Nothing. If W1 and/or W2 need to be changed on the BAS, change them.
There is no requirement to change previously lodged STP reports. The employee values are YTD and therefore any changes will be picked up in the next pay event or if you send an update event.
The BAS is the official form that changes the W1 & W2 fields.