Single Touch Payroll + EOFY: Changes and Actions
Written by: Julie Pullen | Accounting Team
Single Touch Payroll (STP) is an Australian Government initiative to streamline employers’ payroll reporting to Government Agencies. With STP, you report employees’ payroll information to the Australian Taxation Office (ATO) each time you pay them through STP-enabled software (i.e. Xero, Quickbooks, MYOB, Payroller, etc.).
Payroll information sent to the ATO includes:
- Salaries + Wages;
- Pay As You Go (PAYG) Withholding; and
- Superannuation liability information.
STP started on 1 July 2018 for employers with 20 or more employees and 1 July 2019 for employers with 19 or fewer employees and it is a mandatory obligation.
How STP Works
STP works by sending wages, tax and super information from your STP-enabled payroll or accounting software to the ATO when you run your payroll.
What you need to do is:
- Run your payroll as normal;
- Pay your employees like you usually would;
- Provide your employees with a pay slip; and
- File the STP on the pay run as soon as it has been processed.
Changes to Single Touch Payroll
From 1 January 2022, the data collected through STP was expanded (known as STP Phase 2) to collect additional payroll information such as breaking up gross wages by reporting the respective pay items separate to gross ordinary wages (i.e. overtime, bonus payments, leave taken, etc.).
All employers should now be STP reporting and have transitioned to STP Phase 2 reporting.
If you are not reporting through STP Phase 2 you will need to update immediately. Your payroll/accounting software provider will have instructions on how to do this.
If you are new to employing, you will need to start reporting immediately through STP Phase 2-enabled software as soon as you start paying your employees to avoid any penalties. There is no need to transition from STP Phase 1.
Once you have set up your payroll/STP Phase 2 reporting software, you will need to call the ATO to register your business for STP reporting and you will need to provide your SSID (Software ID). This information is contained within the Single Touch Payroll reporting section of your payroll software usually under the ‘Single Touch Payroll’ heading. Once you have registered you can start filing your payruns through STP reporting.
Note that if you don’t contact the ATO to register for STP you will receive errors when trying to file your STP.
There’s a lot to keep track of when it comes to bookkeeping every quarter, you can find out all you need to know in this article; Getting Your Bookkeeping In Order For Each Quarter
PAYG + More STP Changes
From 1 July 2023, ATO PAYG withholding pre-fill started.
If you lodge your BAS’ using ATO online services, ATO PAYG withholding pre-fill will be made available for:
- Monthly PAYG withholders from the July 2023 activity statement; and
- Quarterly PAYG withholders from the Quarter 1 2023-2024 activity statement.
How ATO PAYG withholding pre-fill works:
Your activity statements in ATO online services will pre-fill with the information you have reported through STP i.e.
- PAYG withholding label W1: The total gross salary or wages and other payments made in the PAYG withholding month or quarter.
- PAYG withholding label W2: The total amounts of tax withheld from the payments shown at W1.
Why Is It Important Toward The End Of The Financial Year (EOFY)?
Filing STP is important when it comes to EOFY because there are no longer manual Payment Summaries (formerly Group Certificates) issued to employees at the end of the financial year for them to use to prepare their income tax return.
Each employee will now receive an Annual Income Statement directly in their MyGov Account ready for Income Tax Return preparation from STP end of year finalisation. In addition to this, when your accountant prepares your income tax return, your wage and salary information will pre-fill into your return based on the STP filing of your payroll for the year.
What Do I Need To Action for STP + EOFY?
Firstly, you need to ensure all of your pay runs for the financial year have been STP filed.
Secondly, reconcile your payroll clearing/wages payable account. When each pay run is processed, the net amount owing to the employees is allocated to the payroll clearing/wages payable account and it sits as a liability until paid. When you pay your wages, the payment must be allocated to this liability account. At the end of the year once your final pay run has been processed you need to ensure the balance in your payroll clearing/wages payable account is Nil.
In other words, you don’t owe any wage payments. If there is a balance in this account you will need to review your wage payments against the pay run to determine where the error lies and fix it up.
One of the most common errors we see is that the wage payments are allocated to the wages and salaries expense account instead of the payroll clearing/wages payable account.
Note: This is incorrect as it incorrectly doubles your wages and super figures.
Lastly, once you have reconciled your payroll clearing/wages payable account you will need to process your end of year STP finalisation.
Note: The due date for STP finalisation each year is 14 July.
This function closes off the payroll for the year and enables your employee’s Income Statements to be ‘tax ready’ in their MyGov accounts. It also pre-fills the employee income tax return with the payroll totals for the year.
Note: They will not be able to lodge their income Tax Returns until their Income Statements are tax ready.
Tax time comes with many vices but the stresses can be mitigated with good tax planning! Read more on tax planning in another of our recent blog articles; Tax Planning For Businesses, Sole Traders + Individuals
Canny Accounting + Expert Single Touch Payroll + Bookkeeping Advice
If you are unsure about processing your STP finalisation our bookkeeping team is here to help!
If you require our bookkeeping team to process your end of financial year STP finalisation, let us know as soon as your final pay run is processed for the financial year so we can ensure this is completed by the due date.
Get in touch with our team to discuss how we can start assisting you with Single Touch Payroll and other EOFY duties.
