New payroll system a game changer for small business

The writing is on the wall for those still relying on paper payroll systems, with the introduction from July 1 of new laws requiring all businesses to use Single Touch Payroll.

This marks a significant change for businesses, particularly small ones –– but it’s also one that Pitcher Partners’ Senior Manager and payroll specialist Greg Wilkins would urge to not be afraid of.

Put simply, Single Touch Payroll (STP) changes the way employers report to the Australian Taxation Office (ATO), and requires businesses to use software to report all salary and remuneration information, including wages, deductions and superannuation information at the same time. This eliminates the need for employers to report Pay-As-You-Go (PAYG) withholding in activity statements throughout the year.

The requirement to use STP came into force for businesses with 20 or more employees from last July, with some 40,000 businesses already using the electronic system. With the passing of the new laws mandating the use of STP for all businesses last month, those with 19 or fewer employees will also have to get on board with the new system from July 1 2019.

Mr Wilkins says that the ATO is well aware that some businesses will find the transition to the new online payroll system more difficult than others, but is urging companies not to panic about the rollout.

“The cost and complexity of the transition needs to be assessed on a case-by-case basis, and the ATO has implemented a range of measures to assist with it,” said Mr Wilkins.

“Small business groups have been rightly concerned about the implications for small businesses, particularly those that don’t already have an electronic payroll and software system in place.

“To mitigate this, the ATO has asked software developers to build low-cost STP solutions at or below a subscription cost of $10 per month for micro employers – including simple payroll software, mobile phone apps and portals.”

More than 30 companies have so far put forward product proposals, and these are expected to be available in the market soon.

Small businesses that aren’t ready for the switch by July 1 needn’t panic: the ATO has already stated operators in that situation can apply for a deferred start date. It’s also worth noting that the ATO won’t force employers with 19 or less employees to purchase payroll software if they don’t currently use it, and exemptions will be available for those businesses with no internet or an unreliable connection.

That said, there are very good reasons for small businesses to get on board.

“ATO Commissioner Chris Jordan is clear on the benefits of extending STP to all employers: helping ensure all Australians get their full superannuation entitlements, giving greater transparency and helping ensure a level playing field for small business, and as an important step in streamlining business reporting and keeping pace with the digital age,” Mr Wilkins said.

“He’s also pledged the ATO’s approach to extending STP will be ‘flexible, reasonable and pragmatic’, with no penalties for mistakes, missed or late reports for the first year.

“At Pitcher Partners, our bigger clients who have made the shift – particularly those whose software providers were ready to offer STP reporting – have been quite happy with the move.”

The extension of STP to smaller businesses provides a timely opportunity for operators in this space to take a step back and consider their systems and processes, and whether it’s time to go digital.

Greg Wilkins advises all small businesses that whatever your situation, there’s no need to hit the panic button in the lead up to July 1 – but do take the opportunity to talk to your advisor, and get some guidance around what STP could do for you.