Not using Xero? The introduction of STP might be the perfect time to consider it.

Not using Xero? The introduction of STP might be the perfect time to consider it.

In a recent blog, we talked about the introduction of Single Touch Payroll, (STP) which is currently being implemented by the Australian Tax Office.

Organisations with 20 or more employees are already reporting through STP unless they have specifically been granted a deferral. And now, smaller-sized organisations will need to migrate to STP as well.

ALL organisations – businesses as well as not for profits – must comply, and you need to be ready by the start of the new financial year 1 July 2019.


Exemption - ‘closely held payees.’

The only exemption is for ‘closely held payees’ who will be given a one-year exemption from Single Touch Payroll reporting until 1 July 2020.

The ATO’s definition of a closely held employee is one who is a non-arm’s length employee, directly related to the entity from which they receive payments, including family members of a family business, directors of a company, and shareholders or beneficiaries.

The ATO has recognised that in many circumstances, these payees do not fit into a ‘traditional payroll cycle or process’, and typically take a drawing when there is cash available in the business, or in other ways, with the ‘wash up’ done at the end of the year, at tax time.

However, the ATO is keen to migrate this category as well, and will provide more details around how reporting will work over the coming months.

What is STP

What is STP?

STP is the new way of reporting employees’ salaries and wages, allowances, deductions (for example, workplace giving) and other payments, pay as you go (PAYG) withholding and superannuation information to the ATO.

It has been introduced as part of the Federal Government’s overall pledge to remove red tape, duplication and time consuming reporting.

“The great thing about STP is that it will minimise end of financial year paperwork for small business, but you will be required to send payroll information directly to the Australian Tax Office (ATO) at every pay cycle,” says Michael Mekhitarian.

Payroll Report

What’s changing?

“You used to report this to the ATO once a year. But as of the new financial year, you will need to send a report after each pay day. And those reports must be submitted digitally, using a very specific format,” says Michael.

“It is the intention of the ATO that single touch payroll reports will be the sole record of salary/wages paid, taxes collected, and superannuation contributed. The advantage for employees is that they can see all the information online, via the myGov. portal,” he explains.

“The new system will be paperless, seamless, and real-time. And because all businesses will be required to use STP, it makes sense to minimise the hassle in the migration process as much as possible. In order to prepare for the introduction of STP, visit the ATO’s website for guidelines and a checklist.”

STP Ready

Xero has in-built STP readiness.

Xero is already STP ready – so it’s a great option if you’re not already using it.

While many other software providers are building STP compatibility into their software too, Xero has a highly respected reputation. The fact that it’s the software of choice for tens of thousands of small businesses across Australia, is testament to its suitability.

Plus, if you’re a newbie or if something goes wrong, because so many people are proficient in Xero, it’s not difficult to find help if you need it.

Micro business

Xero is perfect for Micro-businesses

Xero has also introduced a cost-effective STP-ready solution for micro-business with less than 4 employees.

Many businesses with so few employees tend to resist moving to bigger software products like Xero, believing that their size makes their accounting manageable (and, believe it or not, there are some who still use Excel spreadsheets!), but with the introduction of STP, it’s definitely worth thinking about Xero.

It has many advantages. It’s secure and mobile, which means that you can access your accounting data wherever and whenever, and keep a close eye on your cash flow and financials at all times.

Make business easy

Make business easy

“Of course, it goes without saying that when you’re a small business, the more time-intensive, repetitive book-keeping and administration tasks you can automate, the better, because it frees you, and your employees up to contribute in more meaningful ways to the business itself and to focus on the lifeblood – making money,” says Michael.

If we can help you get STP ready, contact us.


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