From 1 July 2018, all 'substantial employers' in Australia are required to use the Single Touch Payroll system for reporting tax and superannuation.

The Australian government is implementing Single Touch Payroll Reporting (STPR) from 1 July 2017, and it becomes mandatory for all employers with 20 or more employees on 1 July 2018. These employers are considered 'substantial employers'.

The intent

STPR was introduced as part of the government’s Budget Savings (Omnibus) Bill 2016, bringing changes to employers’ reporting obligations to provide more streamlined and simplified reporting of employee salary, pay-as-you-go (PAYG) and superannuation payments. Under the new system, the Australian Taxation Office (ATO) will receive real time reporting information at the same time employers are paying their employees; instead of the monthly or quarterly reporting at entity level that is currently in place.

The STPR system is designed to help the Commissioner of Taxation determine whether employers are compliant with their PAYG and superannuation obligations in a timely fashion. This will enable the Commissioner to react promptly to any breaches and increase the amount of compliance activity, especially for the superannuation guarantee surcharge.

Once the system has become fully automated, the employers’ compliance costs will be reduced, as the reporting requirements and other reporting measures are reduced, such as the reporting of PAYG withholding tax via activity statements.

Impact to businesses

Any employer with 20 or more employees on or from, 1 April each year, is deemed a substantial employer for the following year. Any employer that falls below the 20-employee threshold throughout the year can request an exemption to the reporting, which will be considered on a case-by-case basis. Employers with less than 20 employees can elect to use the STPR process, however unlike substantial employers, participation is not mandatory.

Following are the main changes regarding the STPR:

  • The reporting of gross wages and PAYG withholding at an employee level to the ATO will need to take place on or before the date the PAYG withholding amount is due. Currently this reporting occurs at an employer level when completing the Activity Statement.
  • Salary, wages, ordinary time earnings and superannuation contributions are to be reported at an employee level on or before the payment is made to the super fund.
  • Payment summaries will be phased out for employers using the STPR system to report their fringe benefits tax (FBT) and superannuation contributions by 14 July each year.
  • Employees will have access to an ATO portal containing real time payroll information and annual reports.
  • Employees will have the option to complete superannuation choice and tax file number declarations online. But, employers are still required to provide paper forms to their employees.

To comply with these changes, employers should review their internal business process and payroll software or process to make sure they are compliant with the STPR, PAYG withholding tax and superannuation guarantee charge requirements. The increased visibility will result in a higher risk of an ATO review for non-compliant businesses.