As you will no doubt be aware, effective from 1 July 2018 it will be mandatory for all businesses with 20+ employees (as at 1 April 2018) to report employee salary or wages, PAYG withholding and superannuation information to the Australian Taxation Office (ATO) via a payroll system which enables Single Touch Payroll. It is anticipated that it will become mandatory for businesses with 19 or less employees to commence Single Touch Payroll reporting as of 1 July 2019, this is still subject to legislation being passed in parliament.
For the purposes of Single Touch Payroll, when determining how many people were employed by your business as at 1 April 2018, you are required to undertake a count of all physical employees. It is not an FTE count.
The employee headcount must include:
- Full-time employees
- Part-time employees
- Casual employees (who are on the payroll and worked any time in March)
- Employees based overseas
- Any employee who is absent or on leave (paid or unpaid)
- If your business is part of a company group, the total number of staff employed by all member companies of the wholly-owned group must be included in the headcount.
The headcount should exclude independent contractors, staff provided by third-party labour hire organisations, company directors or office holders.
As the 1 July deadline rapidly approaches, you need to ensure your business and systems are ‘Single Touch Payroll’ ready. The ATO, your accountant or payroll provider will be able to support you with matters such as:
- Confirming whether your current payroll provider is Single Touch Payroll compliant
- Confirming whether you meet the ATOs exemption classifications (where applicable)
- Documenting how your pay codes should be classified to ensure tax, superannuation and workers compensation compliance.
- Reviewing your payroll system to ensure all PAYG Withholding and Superannuation configurations are correct (e.g. Tax scales, PAYG variations, superannuation fund details, salary sacrifice arrangements).
- Aligning any calculations performed external to the payroll system (ie. Termination payments and back-pay) to ensure they will be correctly captured.
- Whether there are any impacts on any other software or systems that currently integrate into your payroll system.
If you have not yet received advice regarding the requirements for Single Touch Payroll from your accountant or payroll provider, we recommend that you contact them directly to obtain further information regarding any specific system updates or requirements that you may need to implement.
While the introduction of Single Touch Payroll will provide a number of benefits for employers, including:
- Removing the requirement to lodge a tax file number (TFN) declaration with the ATO,
- Allowing adjustments to be made (even for a prior payroll period) in future period reports which provides increased flexibility to correct any errors in subsequent pay runs.
- Providing validated employee data to each employee through myGov and to Single Touch Payroll compliant solution providers.
It is anticipated that the introduction of this system will result in an increased focus on monitoring and enforcing employer compliance from external agencies, particularly in relation to the auditing of activities surrounding PAYG Withholding and Superannuation.
The Single Touch Payroll system will see the ATO being provided with real time access to a level of information that has not previously been made available to them. This will in turn enable the ATO to:
- Have a greater opportunity to inspect information provided and target non-compliant employers.
- Recognise and deploy early assistance to employers who are struggling to meet their employer obligations.
- Ensure that superannuation funds are reporting contributions received more frequently (at least monthly) which will enable the identification of non-compliance and the taking of prompt action.
- Strengthen their recovery powers to ensure that unpaid superannuation is better collected; and
- Seek court-ordered penalties in serious cases of non-payment.
Similarly, the current targeting of employer compliance within particular industries by the ATO, Fair Work and WorkCover is expected to continue, if not increase, under this system. While privacy legislation may prevent the direct sharing of employee information between each agency, data sharing arrangements may allow for the sharing of algorithms which can identify what information is flagged. This increases the likelihood that such agencies will be able work together collaboratively using the real time data.
Given the increased monitoring that will be possible with the sharing of real-time payroll data under Single Touch Payroll, it is essential that you have the systems and processes surrounding payroll right so that each pay run is correct and that you are confident in the data that is being provided to the ATO.
If it is determined that your business will no longer have a requirement to provide payment summaries directly to employees (as they will obtain payment summaries directly through their myGov account), it is recommended that steps be taken to support this transition by:
- Developing and implementing a communication plan to support employees with sourcing their payment summaries directly from their myGov account
- Providing myGov reference guides to your employees.
In addition to reviewing and confirming your payroll system requirements or payroll processes, it is recommended that steps also be taken to review the Human Resource practices and processes which support the collection and processing of payroll and employee entitlements. In particular, it is recommended that you:
- Review your current payroll reporting and validation process to identify any data or procedural gaps and to identify any improvements which may be required.
- Ensure that current employee onboarding process capture the information required, including collection of the individual’s tax file numbers within 14 days of their commencement date.
- Review your current superannuation processing practices to ensure the timely capture of employee fund details.
- Validate that the data captured on your current timesheets is reliable.
To ensure that both your payroll systems and Human Resource practices are compliant and current, it is recommended that an audit be conducted of your current systems in the lead up to the commencement of Single Touch Payroll on 1 July 2018. HR Advice Online can support our clients through conducting an independent HR Audit of your HR processes on a fee for service basis.
If you would like further information regarding our HR Audit services, please do not hesitate to contact us 1300 720 004 or via email at [email protected].
Information in HR Advice Online guides and blog posts is meant purely for educational discussion of human resources issues. It contains only general information about human resources matters and due to factors such as government legislation changes, may not be up-to-date at the time of reading. It is not legal advice and should not be treated as such.