Single Touch Payroll: What are the benefits & risks for your business?

Whether single touch payroll affects your business now or starts affecting it next year, you need to be prepared for this important change.

As of 1st July 2018, businesses with over 20 employees must report their employees’ tax and superannuation information to the ATO via single touch payroll software.

Businesses with 19 or fewer employees have another year to prepare but they can elect to report through single touch payroll prior to 1st July 2019, if they’re ready.

This regulatory change may expose some businesses to unnecessary risk but there are also benefits. How is your business affected?

Single Touch Payroll (STP): Main benefits

Single touch payroll is a new way by which employers are required to report their PAYG and super contribution information to the ATO.

Rather than reporting PAYG monthly or quarterly, employers are required to report it after each “payroll event” (meaning each time payroll is processed) along with super contributions.

The main benefit of single touch payroll is to help employers streamline their reporting process to the ATO.

With information provided after each payroll cycle, the ATO will be able to pre-fill PAYG sections of BAS for employers and eliminate potential errors and double handling.

Furthermore, this could eliminate the need for employers to generate and distribute payment summaries to their employees. Instead, employees may be able to obtain this information via the myGov website.

Penalties for non-compliance with STP rules

The ATO will be able to raise penalties against a business for failing to comply with single touch payroll rules.

However, during the first 12 months of STP coming into effect, businesses that fail to report on time will be exempt from an administrative penalty. This is unless the ATO gives the business notice of continuing failures; then a penalty may be raised in the future.

Which business are at risk with Single Touch Payroll?

The major risks around STP are for businesses in financial difficulty.

This is because the ATO will now have immediate information regarding PAYG tax and superannuation payable by a business.

For businesses unable to pay PAYG Tax and superannuation, this means that the ATO will be able to take more rapid recovery action for unpaid debts. This may include:

  1. Issuing Director Penalty Notices, which may make the directors of a company liable for the company’s PAYG Tax and/or superannuation;
  2. Issuing a Garnishee Notice to a business’s bank account or another party holding money on behalf of, or payable to, a business; or
  3. Taking steps to place a company in liquidation.

What can you do if you’re at risk from STP?

If you are now using single touch payroll but cannot pay the required amounts of PAGY tax and superannuation being reported, the ATO will begin recovery action in the near future.

You should therefore be proactive in obtaining professional advice and, if warranted, negotiating a payment arrangement with the ATO.  You should also seek advice about implementing turnaround and profit improvement strategies for your business.

If you’re in this position, it’s important to address this as soon as possible. We can assist if you’re in financial difficulty or facing recovery action from the ATO.  Simply get in contact with us for a free, no obligation discussion.

 

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