There are 2 important changes that ALL employers need to be aware of commencing 1st July 2019.
SINGLE TOUCH PAYROLL (STP)
STP is a new way of reporting tax and super information to the ATO.
From 1st July 2019, reporting to the ATO using Single Touch Payroll is compulsory for all entities paying salary, wages, superannuation, allowances etc to its employees, directors and any associates. The information is sent to the ATO either directly from your bookkeeping software, or through a third party – such as a sending service provider.
The ATO have outlined 3 options for employers to report using STP, which are:
- Continue to use your existing software provider. We have researched most accounting software providers and all are ready for STP to be implemented for your business. If you have not received updated software from your service provider, please contact them as soon as possible.
- Start using electronic software to record all your business activity including payroll for employees, alternatively just to report payroll activity as a standalone feature. We suspect that most clients who have up until now been using a simple spreadsheet to record their accounting records, will need to select this option. We have been able to source a number of low cost solutions (starting at $10/month) that will not only ensure you a remain compliant with the ATO, you can also increase your business efficiency with an electronic accounting package. PLEASE contact us today and we will help arrange for this service to be setup ready for you to use as of 1st July 2019.
- Lodge through your Tax Agent (ie Australasian Taxation Services) or your BAS Agent. Please be aware that this service is provided as an additional cost to your current annual tax requirements. We expect the minimum cost to be approx. $200/year (plus GST) to cover our own additional software requirements, plus an hourly charge for the time taken to prepare your STP reporting, each reporting period, which is every time you pay your employees (weekly/fortnightly/monthly/quarterly or annually). Please contact your local ATS staff member to obtain a quote for this new service.
REMOVING TAX DEDUCTIBILITY OF NON-COMPLIANT PAYMENTS
With effect from 1 July 2019 businesses/entities can no longer claim a tax deduction for salary/wages/director fees paid to employees unless you as the employer have deduced the appropriate PAYG Withholding Tax from this salary first and remitted the withholding tax to the ATO. Only employees who have an approved Variation Letter from the ATO (issued annually) can reduce their PAYG withholding tax from wages.
You can only claim a deduction if you comply with the PAYG withholding rules. Payments that must comply are as follows:
- salary, wages, commissions, bonuses or allowances to an employee
- directors’ fees
- to a religious practitioner
- under a labour hire arrangement
- for a supply of services (except from supplies of goods and real property) where the contractor has not provided you with their ABN.
Do note that this may also apply where adjustments are made to salary and wages as part of yearend accounting and tax reporting. Any payments you make where you haven't withheld or reported the PAYG tax are called non-compliant payments. You won't be able to claim a deduction if you don't withhold any PAYG withholding tax or report the PAYG withholding tax to the ATO. If you make a genuine mistake and withhold or report an incorrect amount, you will not lose your deduction.
The above changes may have a significant impact on how you manage your current business activities, we therefore encourage you to contact your local ATS staff member to discuss the options available to you or send an email to firstname.lastname@example.org.