The arrival of Single Touch Payroll is being described as the biggest revolution in tax
since the GST was introduced in July 2000. But wrapping your head around how it
all works can seem challenging from the outside. We spoke to the experts from the
Australian Taxation Office (ATO) about what small businesses need to know.
In principle, it’s simple. From 1 July 2019, all businesses with fewer than 20 employees
will be required to report their employees’ payroll information to the ATO every time
they pay them.
This isn’t a completely new development. Businesses with 20 employees or more have
already been using Single Touch Payroll since July 2018.
But while the process may seem simple, there are still many implications for Australian
small business owners.
Payroll system upgrades
Single Touch Payroll will provide the ATO with real-time information whenever payroll is
completed. This means that businesses still using pen and paper will need to get online.
But don’t panic if you’re currently in this bracket. Recent estimates show as many as one
in five businesses will be making the change with you.
Thankfully there are some big benefits to making the switch. For example, businesses
that implement Single Touch Payroll with the relevant reporting software will be eligible
for up to $100 in tax relief.
If you need to implement or update the software but you don’t have the available cash
flow for the investment, speak to your broker about your options. A small business loan
could provide a short term cash-flow solution before the deadline hits.
For small business owners who already use accounting software like Reckon, Xero or
MYOB, the transition will be relatively hassle-free. Like the name suggests, it will require
the ‘push’ of a single button to send the data to the ATO at the time payroll is made.
For these small businesses, the cost of the functionality associated with Single Touch
Payroll is only around $10 a month, or a little more. While 40,000 businesses already use
Single Touch Payroll, there will soon be a wave of newcomers, as approximately 700,000
more will need to start using it before 30 September 2019.
Payroll information and superannuation
Single Touch Payroll will send the ATO a range of information, including gross, tax,
net and superannuation details. This is important because not all businesses pay
superannuation entitlements in accordance with the law.
Unpaid superannuation liabilities were also singled out in the recent Federal Budget.
The ATO will be provided with additional funding to pursue businesses for not meeting
The ATO says it’s owed $23.7 billion from Australian businesses, with small businesses
accounting for $15.1 billion of that figure – well over half. Having instant visibility means
the ATO is in a better position to manage debtors and have fewer debts outstanding.
The ATO wants to reduce the amount of outstanding debt and stop Australian
businesses using it as a revolving line of credit. Some suggest there could be billions of
dollars in savings for the government should the program go to plan.
The ATO says the first year of operation will be one of transition, and penalties will
generally not apply until later. However, the Single Touch Payroll legislation includes a
penalty for making false and misleading statements in any report.
The Commissioner of Taxation has the discretion to correct a mistake without penalty,
but if an employer knowingly reports false information and doesn’t correct it within 14
days, they will be open to further action.
“Our approach will be flexible, reasonable and pragmatic. Our immediate focus will be
on helping micro employers transition to STP rather than penalising non-compliance,”
an ATO spokesperson said.
Like all big changes, adjusting to new rules and regulations around tax can be
challenging. If you need to invest in software updates or other preparations before
the transition, speak to your broker about how a small business loan could help.
Connolly Wealth Management
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Disclosure: Christopher Connolly (280099) and Connolly Wealth Management Pty Ltd (333350) are Authorised Representatives of Wealthsure Financial Services Pty Ltd AFSL 326450.
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Sources; Prospa Advance Pty Limited