With initiatives supporting Australia’s small business owners in handling digital rollouts for payroll, from PAYG to wages, the ATO has been slowly but steadily moving towards a new set of compliance requirements. As of the 1st July 2021, STP is no longer optional, and the majority of small businesses will be required to meet specified STP compliance rules.

Want to know what this means for your small business? We've covered all you need to know to ensure you comply and are on track for your payroll this year:

What is STP?

STP is Single Touch Payroll, a reporting system required by the Australian Taxation Office for all employers. It is an initiative created by the Australian Government to reduce the necessary amount of reporting to Government agencies. STP-enabled software directly reports all the required information automatically, including salaries and wages, PAYG withholding and superannuation.

What does STP compliance entail?

To comply with Single Touch Payroll, small businesses must digitise their payroll using suitable software. Unless a deferral or exemption covers your business, all employers of all sizes are required to meet these Government requirements. While there were further exemptions, from the 1st of July, the vast majority of small businesses will need to follow the ATO's requirements for compliance with STP reporting.

What are the changes under the new compliance requirements?

As of the 1st July 2021, most small businesses will be required to use STP compliant software, even if they were exempt previously. This may mean you have to opt into the initiative for the first time, or it could mean that previously unreported employees must now be included within your STP digital payroll process.

The two most significant changes are:

• Closely held payees will not need to be reported through STP on a monthly, quarterly or per-payday basis.

• Micro and seasonal businesses will now need to report on a routine basis, instead of quarterly, unless they have a specific exemption pre-defined by the ATO.

What is a closely held payee?

The most significant and relevant change to many small businesses is reporting closely held payees through the STP digital process. The ATO defines a closely held payee or employee as someone related to the source of payment. An example of this would be a trust fund beneficiary or a relative within a small family business. The reason for past exemption was because irregular and infrequent payments were more common with closely held payees.

How will I need to change my processes for closely held payees?

From the 1st of July, absolutely everyone paid through your business will need to be accurately conveyed to the ATO via the STP digital reporting process. However, to acknowledge the variability of closely held payees, the ATO allows reporting on a payday basis or a quarterly basis. It's also possible to submit a reasonable quarterly estimate in the case of highly variable pay.

What do the changes for micro and seasonal businesses mean?

For extremely small or seasonal businesses, there is no longer any exemption in place for payday reporting. While previously, micro-businesses or specific industries could report quarterly, this is no longer the default. Reporting on a payday basis is a requirement, no matter how small the business is.

Affected industries include:

• Fishing, forestry & farming

• Clubs and associations run as not-for-profits

• Intermittent and seasonal employers

Certain businesses may be eligible for specific concessions or special circumstance exemptions, so it's essential to check with your advisor or look at the ATO website to see where your business lies.

Can an advisor help with managing STP changes?

Working with a trained and qualified advisor is always a good idea when it comes to ATO compliances. 360 Accounting Services can provide an expert eye and insight into the new changes and requirements under the STP. With the end of the financial year just on the horizon, it’s better to get in touch with us sooner rather than later to ensure everything is organised in time. Our professional team are on hand to ensure you meet your compliance requirements.

Getting started with your new STP compliance requirements

Do you need extra guidance on STP or have to comply for the first time? Getting started is easy with the proper support. Our expert team can advise on the best software and provide insight into how best to comply with ATO requirements. We know that STP can be confusing for small businesses, so we go the extra mile to deliver a clear-cut, straightforward approach to your compliance responsibilities.

Get in touch today to find out more and chat with our friendly team, or check out our other posts for up-to-date news and information on the latest in Australian finances.