Single touch payroll was introduced on 1 July 2018 for employers who had 20 or more employees at 1 April 2018. If you were successfully granted a deferral or your payroll software provider was granted a deferral you may have a little longer before you’re required to implement single touch payroll in your business. Regardless, it will be expanded to all employers from 1 July 2019.
But what exactly is single touch payroll and how does it benefit your business?
Single touch payroll means that you will report any payments you make to your employees to the Australian Taxation Office (ATO) – like salary, wages, PAYG withholding and superannuation – at the time you make the payment. Rather than waiting to report back periodically, it will be done automatically through your payroll system.
While there are many things to take into account with single touch payroll, the first one is calculating what your headcount was at 1 April 2018 and working out which payments you need to report. When determining if you had 20 or more employees at 1 April 2018, make sure you don’t count the following people:
Even though you don’t count these people when calculating how many employees you had, you will need to include payments that you make to them through your payroll in your single touch payroll reporting.
There are many benefits of touch payroll for your business. These include:
Single touch payroll will help you streamline your reporting obligations and reduce the amount of reporting you need to do. Every time you pay your employees, your single touch payroll data will be sent automatically to the ATO. This means you comply with some of your taxation and superannuation guarantee obligations in real-time. Rather than having to maintain multiple reporting processes, everything will be done with the click of a button.
This will make the process of reporting PAYG payments much simpler. You will also report your employee’s superannuation liability or ordinary time earnings through single touch payroll and superannuation funds will report directly to the ATO when they receive a payment from you on behalf of your employees. This change in process will help the ATO see what your superannuation obligations and payments are without needing to ask you.
If you make a mistake, don’t worry. You can correct an employee’s year-to-date amount the next time you pay them.
As single touch reporting is meant to make reporting easier, you can also choose to do some additional reporting through the process. While it’s not mandatory, you may choose to include reportable employer superannuation contributions (RESC) and reportable fringe benefit amounts (RFBA). As long as these are reported by 14 July in the next financial year and you include a finalisation declaration, your business will no longer need to provide the ATO with payment summaries or a payment summary annual report. This will also help you to streamline and automate your compliance obligations.
You will no longer need to provide payment summaries to your employees when you pay them. These will now be called an Employment Income Statement and your employees will be able to access them directly through the MyGov online portal.
This also means that the final payment summary (otherwise known as a group certificate) at the end of each financial year is now a thing of the past. Instead, the ATO will tell your employees when their Employment Income Statement is ready for them in the MyGov portal. Once they have their Employment Income Statement, your employees will be able to prepare their own tax returns.
Your employees will also benefit from single touch payroll when it comes to tax time. That’s because their myTax will already be filled with their payroll information. This will make it even easier for them to complete their own tax return.
Thanks to single touch payroll, completing your Business Activity Statement (BAS) will also be easier. The ATO will pre-fill your BAS with the payroll information that you provide. This should reduce your chance of making an error or omitting a payment and give you more comfort that your BAS is correct.
An important part of hiring a new employee is making sure that you have all of their information so you can pay them. Under the single touch payroll system, you will no longer have to ask new employees for their tax file number or superannuation information. Rather than chasing up a paper trail, you can just go straight to MyGov and access it yourself.
The introduction of single touch payroll is also a good opportunity for you to make sure your payroll data is in order. If you haven’t already, take this opportunity to see if your master payroll data has any errors. Check if you’re paying all of your employees correctly, and make sure that superannuation is being calculated accurately. This can help you avoid the potentially costly embarrassment of over or under-paying anyone.
You can also check that all your employee information is up-to-date. This could include checking that names, addresses and dates of birth are in order and any employees who are no longer with your company have been removed or archived.
If you’re rolling out single touch payroll in your business, it’s a good idea to speak to your legal or accounting advisers to make sure you’re doing everything by the book. If you’d like to know more about the benefits of touch payroll, get in touch with CCASA.