Simplifying single touch payroll
The new single touch payroll system comes into effect on 1 July this year. What do accountants need to know and tell their clients?
- Accountants will play a pivotal role in the transition to the Single Touch Payroll system.
- The changes apply to reporting, not to payment timelines for companies.
- CA ANZ is running Single Touch Payroll workshops.
By Tarini Puri.
Accountants will play a pivotal role in the changeover to the single touch payroll system which takes effect in Australia from 1 July this year. It is up to accountants to ensure companies have the necessary software and infrastructure to ensure the process is seamless and to fine-tune internal payment systems, says director of Payroll Matters Pty Ltd, Glynn Flaherty. He will present workshops for Chartered Accountants Australia and New Zealand across Australia to guide members.
Effective 1 July, all companies with 20 or more employees are required to report their payroll information to the ATO in real time and directly from their payroll or accounting software. Employers with 19 or fewer employees will also need to comply from 1 July 2019, subject to legislation being passed in parliament.
Flaherty says compliance should be straightforward for companies and accountants already using standard payroll software.
What accountants need to do
The first task is to ensure a company’s payroll system is compliant and ready for the new process. Most software providers are already rolling out the necessary updates, and/or providing advice to accountants to familiarise them with the changes. “The software cost should not be too much, and would likely just be a part of the annual subscription or maintenance charge,” he says.
Companies that are adopting payroll software for the first time and/or feel they will not be able to meet the deadline, are required to lodge a request for a deadline extension, which will be reviewed and granted by the ATO on a case-by-case basis.
Flaherty says it is up to accountants to familiarise themselves with the new terminology, especially standard allowance codes created by the ATO for payrolls.
The other focus area will be to clarify how the company will deal with ‘other’ payment transactions, such as adjustments for over/underpayments, ad-hoc payments and cases such as leave without pay, maternity leave to map them correctly in the new payment structure.
Flaherty believes another policy decision companies and accountants need to make before the new system is in place is whether they will continue to provide an annual payment summary to employees. “While the ATO would already have all the income data on every employee, under the new system the employees would be expected to log on to MyGov at income year end to extract their income records,” he says.
However, not everyone has a MyGov account, or expects to receive a payment summary at the end of the financial year. While payment summaries are not a legal requirement, employers reporting through single touch payroll will need to consider whether to continue to produce them for staff, says Flaherty.
Why it’s important
Last year ATO Tax commissioner Chris Jordan confirmed to Acuity that Single Touch Payroll gives the ATO much more timely information. “Right now, we only get after the year end a statement of earnings from employer saying how much the employee earned and how much tax they took out. We will get that monthly under Single Touch Payroll.”
The software cost should not be too much, and would likely just be a part of the annual subscription or maintenance charge
The government believes the new payroll procedure will help streamline reporting (with real time salary and wage, tax and superannuation information for all employees), and help identify excess welfare payments or prevent tax debts in real time. In the longer run, it will help ensure employees receive entitlements such as superannuation.
Critically, the new single touch payroll system is expected to level the playing field by helping ensure all businesses meet their obligations. The new system is also part of a broader digital agenda that will deliver efficiencies and improvements across the economy. “Similar systems are already in place in countries like New Zealand and UK. The move will help Australia to move into the digital sphere with more robust and real-time reporting,” says Flaherty.
Related: Strategic Tax Planning Day
Join us in Sydney to hear from our line-up of experts on cutting edge strategic tax planning, including the ATO's response to the introduction of Single Touch Payroll and how you can support your clients.
Clearing the air
Among the many doubts about the new system, the biggest is about liquidity, says Flaherty. “Single touch payroll is only about reporting. It does not change payment timelines for companies, including for remittance of employees’ tax withheld,” he says.
A major change is that employers will no longer need to send the PAYG Annual Payment Summary report to the ATO, because the information is shared in real time. “There would certainly not be a need for more accountants in the company to meet the requirements, nor will it overly burden the existing staff,” says Flaherty. “On the contrary, once the new system is settled in, it’s going to make end-of-the year reporting and tallying that much easier.”
Updated software is key
Payroll system providers say they are keeping up with notifications from the ATO regarding the new system, and are confident of rolling out suitable upgrades for their clients. Many accountants are researching the changes and some still need to become aware of the timeline, says Simon Berglund, Vice President – Customers for Life at Sage Australia. “It’s a significant change, and we are offering online and on-premises consultancy to our clients to ease the transition into the new system,” he says. “We have also been approached by new customers, who want to adopt digital technology to keep up.”
Related: CA ANZ Single Touch Payroll Information
Single Touch Payroll is a reporting change for employers which will streamline the way they do business with the ATO.
Tarini Puri is the production coordinator of Acuity.