Financial distress in business usually manifests itself with non-payment of statutory obligations, including PAYG and superannuation. Those monies rightfully belong to an employee, but also represent an easy target when cash flow dries up. In an attempt to provide transparency and to help prevent this non-payment, the Federal Government’s Digital By Default Program proposes to commence the ATO’s Single Touch Payroll initiative (“STP”) on 1 July 2018. From that date, an employer who has 20+ employees as at 1 April 2018 will be required to advise the ATO certain payroll information. Standard Business Reporting software will ensure that any payroll system will be linked to the ATO.
The Main Verse – What is STP?
The idea of Single Touch Payroll is that each time a business pays its employees, a report will be generated to the ATO. The report will include allowances, salaries, deductions, PAYG and superannuation payments. The intention is that on 1 July 2019, all employers of any size will be required to comply with this initiative.
Keep the Beat – What does it mean for employers?
The STP ensures transparency and accountability of employers in their obligations and duties to employees, as well as the ATO. Real-time information will be online at my.gov.au. This means general compliance time could be reduced once the system is set up – for example, employers will no longer be required to provide a payment summary at the end of each financial year.
At the same time, there could be a more pressing need for compliance because employees will have access to real-time financial information. If that compliance is not being met, an ATO audit or phone call may be triggered.
Here Comes the Hook – What’s in it for the employee?
The same things apply in an employee’s favour – access to real-time payroll information under the STP means that an employee doesn’t have to ask or wait for their employer to provide their payroll information. An employee may not need to make direct enquiries with their super fund for confirmation that superannuation payments have been made.
The Rap – A few things to remember
- At this stage, the STP for employers with 19 or less employees is a proposal only. Legislation is still required to pass for this initiative to commence;
- The STP may result in struggling business seeking professional advice before things pass the point of no return. We wonder whether this might enliven the new Safe Harbour provisions under the Corporations Act 2001 (Cth);
- This enforced transparency may result in fewer companies using employee’s funds to support cash flow.
Should this initiative be ‘re-mastered’, we will keep you updated. If you’d like to know more about how the STP might affect you, contact Holly Jackson on (02) 8488 3389 or email@example.com.
*Disclaimer: We accept no responsibility for MC Hammer’s “You can’t touch this (oh-oh oh oh oh-oh-oh)” becoming stuck in your head as a side effect of this article.