What is Single Touch Payroll?
Single Touch Payroll is a new way of reporting tax and superannuation information to the ATO.
Using this new method, employers are required to report employees wages information including gross wages, tax withheld and superannuation every time they process payroll for their employees which could be weekly, fortnightly or monthly.
This new law is compulsory for every employer from 1st July 2019 and as per Chis Jordan (commissioner), ATO will be taking a reasonable approach in the first year helping small businesses transition to this new way of reporting.
How it will impact you as a small business owner?
If you are a small business with less than 20 employees and using common software like XERO, MYOB or Quickbooks, you don’t need to worry since these software providers will have an additional feature which will enable you to report employees information directly to ATO.
However, if you are a small employer with less than 4 employees and have no software, you can either use the services of your local tax agent to assist with this process, or you can use simple and easy software costing $10 or less or some are free to enable these reporting requirements.
Using Single Touch Payroll, you are no longer required to do year-end payment summaries and create electronic files or fill lengthy paperwork and submit payroll information to ATO.
While reporting on a frequent basis and then flagging the last payroll of the year will help you do this job easily.
Here are the winners and losers from this new method of reporting.
Using Single Touch Payroll, the biggest winners are the employees since the reporting has become mandatory, the employers will make sure they are getting the correct amount of wages including all the entitlements such as superannuation and leave etc.
The employers will also be the winners because this new way of reporting saves them time filling out lengthy paperwork, timesheets and payslips. Using software will help them use modern technology in the most efficient way and they are not required to store big files.
ATO has also confirmed that software providers will be releasing apps to use this software, this means your business payroll is on your fingertips.
The biggest losers using Single Touch Payroll are the businesses who are not doing the right thing when it comes to payroll. These are the employers who have never paid taxes and superannuation on time and in some cases avoided for multiple years.
Employers who underpay employees or never pay super at all will no longer be able to hide their payroll dealings.
Implementing Single Touch Payroll, I think ATO has taken a very positive approach by transitioning towards making information more digital and also making employers responsible to do the right thing.