David Sofrà, Hayley Lock and James Trainor discuss the impacts of Single Touch Payroll on payroll processes.
Payroll is a bit like the engine of a car, most of the time it purrs along just fine but every now and again it coughs and sputters and because it is hidden away, few people really know how it works.
The advent of Single Touch Payroll (STP) gives tax managers the opportunity to take a look under the hood and gain a better understanding of how payroll works. This is essential to ensure that the company is compliant with its tax obligations and support ‘justified trust’ with the Australian Taxation Office (ATO).
STP will significantly change payroll processes for a majority of employers, requiring accurate pay as you go (PAYG) withholding and superannuation reporting directly to the ATO when employees are paid. Given this unprecedented direct access to data, and that the directors are personally liable for underpayments, due diligence over the payroll process is timely.
Employees will be able to access details of their pay, PAYG withholding and superannuation contributions in real time. Tax File Numbers (TFN) declarations, superannuation fund choice and payment summaries will all be moved online.
Employers need to consider whether current payroll systems configurations are appropriate and what changes to systems, process and employee communications need to occur.
Tax functions should be involved with analytical reviews of payroll codes to ensure that information provided to the ATO is accurate. It would also be an opportune time to conduct a full payroll data analytics review, so that any changes required can be implemented and tested in time for the start of STP.
STP will be imposed on employers (including those in a wholly-owned group) with more than 20 employees from 1 July 2018.