On 1 July 2018, STP reporting was introduced for substantial employers (20 or more employees as at 1 April 2018). Under STP reporting, an employer reports information on their salaries and wages, PAYG withholding and superannuation to the ATO in line with their payroll cycle.
Amending legislation — contained in the Treasury Laws Amendment (2004 Measures No. 4) Act 2019, which was passed by the Parliament on 12 February 2019 (enacted on 1 March 2019) — extends the requirement to report tax and superannuation information through STP to the ATO at the time of the payroll to all employers from 1 July 2019.
There is no need to conduct a headcount on 1 April this year because, from 1 July 2019, all employers will be subject to STP reporting.
This is the most significant change to reporting systems for businesses since the introduction of the GST on 1 July 2000. More than 70,000 employers are now reporting through STP. The ATO expects that as STP reporting is extended to small employers, approximately a further 749,000 employers will be subject to STP reporting.
Of course, small employers are welcome to — and in fact are encouraged to — start reporting through STP voluntarily before they are required to. More than 27,000 small employers are already reporting voluntarily through STP.
Employers yet to start reporting through STP will need to undertake a review of their payroll systems because STP reports are submitted directly to the ATO by STP-enabled compliant software; tax agents cannot lodge STP reports through the tax agent portal.
Some employers will easily transition to STP reporting because they already use electronic payroll solutions which will only necessitate the built-in STP-reporting function to be enabled or the software to be upgraded. However, other ‘digitally-disengaged’ employers (estimated to be around 10 per cent of small employers) who don’t currently use an electronic payroll solution will find the transition more difficult, particularly those who employ only a few people and maintain very basic, and manual, business records and systems.
Over the past 18 months, the ATO has been working with a group of stakeholders — including tax agents and practitioners, BAS agents and bookkeepers, small business owners, and representatives from the superannuation industry and digital service providers (DSPs, otherwise known as software developers). Recognising early that one of the biggest challenges was going to be extending STP to micro employers (those with four or fewer employees), the focus of this working group was to formulate and design alternative reporting solutions and options for micro employers.
The special nature of employers with closely held payees was also considered, as they routinely do not have a regular payroll cycle and often determine or finalise their payroll for closely held payees after the end of the income year, often with their accountant or tax agent as part of the annual compliance process. Special reporting rules have been designed for this specific group of employers.
Senior Tax Trainer with TaxBanter