The Single Touch Payroll (STP) is now becoming compulsory for any organisation employing staff. If your P&C employs any staff, it means you will be required to do your financial and super-annuation reporting to the ATO (Australian Taxation Office) using an STP compliant software system from the 1st of July this year.
What needs to be prepared to get ready for STP if your current system is not yet compliant? Will there be any impact on your business transactions or cash flow? Here is a step-by-step guide to getting ready for the switch to STP.
Step 1 – Assess your STP readiness
You should check with your software provider now to ensure their software is compliant and that you have the latest version for STP. XERO is fully compliant with STP, so you could consider switching to this software if you need a new program. MYOB is also compliant.
Step 2 – Check your transaction accuracy
Reporting to the ATO via STP requires the following information:
- ·payment to individuals/contractors
- ·Gross Pay/Ordinary Time Earnings (OTE)
By using STP, the ATO hopes to obtain all the above information on or before the date when the amount is required to be withheld.
Treasurers processing payroll might face a challenge in meeting these requirements. While most non-profit associations currently process payroll on a regular basis, their reporting to the ATO happens quarterly. Typically treasurers conduct reconciliations on a monthly or quarterly basis to ensure the tax withheld and super payable amount are correct before reporting the information to ATO on their Business Activity Statement (BAS).
However, using STP means there will no longer be room to fix any transaction errors before submitting to ATO each time payroll is processed. But the ATO does allow opportunities to make corrections after lodgement. This could still require a large shift in mindset for P&C Treasurers adapting to this change.
Step 3 – Review your payment timing
Fortunately, the ATO does not yet require associations to pay the withholding and super amount alongside payroll. This means P&C committees can still choose to pay both amounts on BAS/IAS by the due date. However, a small legislation change in the future could easily make it compulsory for P&Cs to pay PAYG and super at the same time that they pay their employees.
Tailored Accounts believe that this might be common practice in future. In fact, it has already been implemented in many other developed countries. Changing to an STP method is a smart decision for your organisation regardless of changes to legislation, as removing end-of-year payment summaries could save you time.
We want to ensure all P&C treasurers are well informed about future changes in this legislation that will affect accounting for your association’s business. If you feel uncertain about STP or any other issues regarding your business accounting, contact us for a short, free consultation. ●
This article appeared in ParentACTion magazine, Term 2, 2019. It was Prepared by Tailored Accounts, a XERO Gold partner.