With the end of the Superannuation Amnesty and Single Touch Payroll being introduced by the ATO across the full spectrum of small business, you need to ensure that you have good payroll and accounting software.
For those small businesses that have taken advantage of the 12-month amnesty provided by the Federal Government to make sure that all Superannuation Guarantee payments for employees are correct and up to date, here’s an important reminder – the amnesty ends in May 2019.
If all Super Guarantee payments are not paid by May, small businesses face hefty fines, which were just recently increased from 50% of the amount owing to 100%.
If you’re catching up to speed with this, some time ago, the Federal Government recognised that many SMEs had not paid employees their full superannuation entitlements, under the Superannuation Guarantee regulations.
There were a number of reasons for this – some employers were simply not doing the right thing by their staff. But by and large, most SMEs had just got into a muddle. Super can be complicated. Rules around entitlements change from time-to-time, and if you’re not tracking your employee super entitlements properly, it can get confusing.
Of course, for some SMEs the issue was linked to cash flow, and then once they found themselves behind in payments, it became increasingly difficult to catch up.
For these reasons, it really pays to invest in reputable accounting and payroll software such as Xero because it helps you to calculate employee entitlements and make sure that you stay on track. Xero also has extensive reporting so you can see all aspects of your financial position at any time, which ultimately gives you a better view of the overall financial health of your company, and particularly its life blood: cash flow.
Now that the Australian Tax Office is also implementing Single Touch Payroll (STP) for all small businesses (previously STP has only been available for businesses with more than 20 employees), there’s another reason to embrace good business accounting software.
“At ATB we actually recommend Xero,” says Jim Vass. “Why? Because it is already set up for STP reporting and it has tens of thousands of small business users around the country. Not only does its large user-base speak to its reputation, it means that because it’s a really well-known brand it’s easier to find staff and business advisors who can use it, minimising fuss and downtime if for any reason you need to employ new or temporary finance people, or suddenly change your accountant.
“Plus, if you have a problem or an issue – you don’t have to go far to find technical help or support. These types of things really matter to small business, and most of our clients using Xero, regardless of their business size or industry, are very happy with its functionality.
“Of course, Xero is not the only STP-enabled software. But it is important to remember that STP will be introduced at the beginning of the next new financial year, 1 July 2019, so if you don’t have an STP-enabled solution in place, you do need one,” says Jim Vass.
“The ATO has promised to extend the deadline a further three months so that small businesses don’t need to act in haste,” he explains.
The introduction of STP means that all small businesses will send their tax and superannuation information to the ATO every pay run. And if you get the right software, this will happen automatically, so there is no extra step for you or your accounting team.
The information you report will include your employees’ salaries and wages, allowances, deductions (for example, workplace giving) and other payments, pay as you go (PAYG) withholding and superannuation information.
Businesses with 20 or more employees are already reporting through STP unless they have specifically been granted a deferral. Now, smaller-sized business will need to migrate to the same regime. To see what you need to do to prepare for the implementation of STP, read the ATO checklist.
No more payment summaries
You will no longer need to provide payment summaries to your employees for the payments you report and finalise through STP.
Although, payments not reported through STP, such as Employee share scheme (ESS), will still need to be reported on a payment summary.
You will no longer need to provide a payment summary annual report (PSAR) at the end of the financial year for the payments you report through STP.
Employees can access info online
Employees will be able to view their year-to-date payment information online, which they will access through their myGov portal, or they can request a copy from the ATO.
It will still be a requirement to do a finalisation declaration at the end of the financial year, because the information you report through STP will not be tax-ready for your employees or their registered tax agent until you make this declaration.
Linked with the super fund
You will report your employees’ super liability information for the first time through STP. The liability is the amount that you would normally provide to your employees on their payslip. Super funds will then report to the ATO once you have paid the super amount to your employees’ chosen or default fund.
More conveniences coming
From 2020 the ATO will introduce pre-fill activity statement labels W1 and W2 for small to medium with holders with the information you report to us through STP. If you currently lodge an activity statement you will continue to do so.
If you’re not in a position to update your payroll software right now, to one that gives you an end-to-end solution, there are other options.
“Talk to your provider about a solution which allows you to run your payroll and send the STP information through a third-party sending service provider (SSP) which is integrated into your software, or one that’s outside your software. Be sure to understand how this will work so that you’re not adding administration burdens to your team, and also be aware of any potential data and security risks,” says Jim Vass.