02 What is Single Touch Payroll?

What is Single Touch Payroll?
From the ATO Website:

Single Touch Payroll is a reporting change for employers.

It means employers will report payments such as salaries and wages, pay as you go (PAYG) withholding and super information to us directly from their payroll solution at the same time they pay their employees.

Employers may need to update their payroll solution to report through Single Touch Payroll.

For employers with 20 or more employees, Single Touch Payroll reporting starts from 1 July 2018.

The Australian Government has announced it will expand Single Touch Payroll to include employers with 19 or less employees from 1 July 2019. This will be subject to legislation being passed in parliament.

The key points of STP are:

  • it is a legislative requirement on employers to report to the ATO through Single Touch Payroll from 1 July 2018 (assuming you have 20 or more employees).
  • it is a reporting change only. How you pay employees or forward withheld tax to the ATO are unchanged.
  • it means that the ATO will be informed of any payments made to employees at the time they are paid, what they are for and what tax has been withheld.
  • They will have more details about some types of payments than used to be reported in PAYG summaries/EMPDUPE file.
  • They will have, for the first time, superannuation liability information

Overview: How does STP work?

To implement STP the Synergetic Payroll module makes calls to web services operated by an ATO approved sending service provider (ozedi) who communicates with the ATO to notify them of pay and taxation details for the company and it’s employees. When STP is fully operational and used correctly Employers will not need to generate PAYG Certificates or EMPDUPE files to notify employees and the tax office about end of year pay/taxation details. They will also no longer need to send or submit separate TFN Declaration/Withholding Declaration details to the ATO as this information can be included in the information sent through STP Events.

There are two types of events sent to the STP web services.

  • Payroll Submit events - these represent the pay/taxes involved with a specific pay.
  • Payroll Update events - Other relevant employee changes that are not able to be included in a pay event

Payroll Submit Events
Payroll submit events are an STP event generated per pay posting (in Synergetic terminology).

STP Payroll Submit events contain:

  • an employer level node containing
    • employer/agent information,
    • declaration information,
    • a batch submission ID and
    • employer (BMS) level W1 and W2 figures for the pay (payments and withholding) These are per-pay figures.
  • employee nodes containing
    • YTD figures for each employee in the pay (YTD figures)
    • subnodes for things like allowances, deductions and ETPs (These are also YTD figures also, though ETPs are grouped by date.)

A simplified example of what these messages may look like can be found in this example (from the ATO’s STP Business Implementation Guide 2).

In actual fact the messages sent are a lot more complex than this example and contain detailed information about all types of wage and taxation items as well as allowances, deductions, lump sump payment information including ETPs and superannuation entitlements.

The employee level nodes can be thought of as what the PAYG summary for that employee would look like if they received no more payments for that financial year.

Payroll Update Events
Certain changes at the employee level which do not result in an actual payment may need to be done through an STP Update Event. For example: correcting the mis-classification of an allowance, or the end of year finalisation indicator.

Employer level information cannot be changed/submitted in an update event and some employee level values cannot be changed/submitted through an update event.

Sequencing of Payroll Events
There are restrictions on when a batch must be submitted through STP and how changes/corrections must be made. This has implications for how a payroll officer must carry out pay processes in terms of sequencing and implementing correction. Synergetic’s payroll module has always been fairly flexible in the sequencing of end of pay events and in what it allows a payroll officer to correct by reopening a pay posting. STP will reduce some of this flexibility but will provide a more structured pay process.

Some of the sequencing restrictions that STP will introduce:

  • Submission of STP Payroll Submit Events must occur on or before the pay’s electronic payment date.
  • As information will be sent to the ATO at the time of the pay, ensuring that the pay is correct before being finished and closed off is more critical.
  • An STP Payroll event cannot be resubmitted if any other STP event has been submitted. This will restrict reopening pays and make it important that editing the pay has been fully completed and saved before closing off the pay.