SPTR 4 - The pros and cons of Single Touch Payroll Reporting
In helping your business understand and deal with the changes around Single Touch Payroll Reporting we’ve already taken you through:
Getting your business ready for Single Touch Payroll Reporting
What’s changing and what’s staying the same?
Why the change?
This next installment summarises the pros and cons for employers of the new reporting systems that are coming into effect from 1 July 2018.
Con: Extra costs for system upgrades
Before the compulsory start date of 1 July 2018, employers will need to make sure their payroll system is STPR enabled. This may mean additional costs, particularly if you don't currently use software-based payroll systems. Many payroll software providers are working with the ATO now to update their products. The Government will offer small businesses (turnover less than $2M) a $100 non-refundable offset for STPR enabled software purchased this financial year, but that's unlikely to cover much of what businesses will need to spend to be compliant. Talk with us about which software is compatible and suited to your business.
Pro: Automatic Payment Summaries
Through STPR, the ATO will have access to real time transactional data and provide this information to employees through myGov. This will take the burden out of some of your reporting and can help to streamline and automate your processes for Payment Summaries moving forward. Manually lodging Payment Summaries with the ATO can be a time-consuming task, especially when you have to do it every six months and 21 days before the end of the financial year. Switching over to STPR means your compliance activities are automated, and populated immediately. It means through STPR, this is automatically filled.
In the same vein, using STPR systems will help you with your Annual Summaries. As a business owner, you may have to complete various types of payment summaries depending on the types of payments you've made through the financial year, which can be difficult to track.
Con: Cash flow disadvantages
STPR will effectively introduce a two-tiered system of approved methods of reporting to the Tax Commissioner (STPR for PAYG withholding and superannuation guarantee, and BAS for other payments such as FBT and PAYG installments). STPR may alleviate some administrative burdens for employers and align payroll and reporting obligations, but the jury's out about whether employers will align the payment of their PAYG withholding with STPR reporting dates after they consider the negative impact on their cash flow.
Pro/Con: No skipping or delaying super
For the first time, the ATO is going to be able to match an employee's payment to a superannuation fund to an actual real-time payslip, rather than waiting for an annual report from an employer with no guarantee the money has actually made it to the individual superannuation account. This might tighten cash flow for employers, but will also make sure unscrupulous bosses are caught out early and reward businesses that do the right thing.
Pro: Helps keep up to date with payroll
Using STPR, you'd be happy to know your pay cycle doesn't have to change. Additionally, PAYG withholding amounts reported will be pre-filled into your activity statement, making it easier to see what has been inputted. You will still be able to adjust or correct information.
Pro/Con: More red tape for taxpayers and agents
There's an expectation that STPR will mean employees will be able to view their payroll related information and annual payment summary online through MyGov. This will require employees to set up an online MyGov account, which is another level of admin for taxpayers and their tax agents alike. Once an account is established, all tax info like assessment notices will routinely be sent there instead of via post. Tax agents will need to obtain these documents from their clients, which creates extra steps and delays.
Con: Greater scrutiny of your business
The Tax Man will have access to even more information to match data and see if all Superannuation Guarantee Charge and PAYG withholding obligations are being met. Errors you make using STPR are likely to drastically increase your chances of an ATO audit or review. However it may be possible to run reports periodically from the new STPR software to allow errors to be identified and fixed before the end of the financial year.
We anticipate the ATO will start reviewing real time data from 1 July 2018, so businesses that have planned early will be well-placed to avoid any unwanted attention.
About the contributor:
Jason Daniels is a partner of Business Services at BDO in Brisbane. He is a qualified accountant, financial manager and business leader with more than 20 years’ experience. His expertise lies in all areas of financial management, especially mergers and acquisitions, business planning, forecasting, restructures, systems as well as process and operational improvement and software development. He holds a Bachelor of Commerce Degree, is a Member of Chartered Accountants Australia and New Zealand.