Legislation changes will be coming into effect during 2018. Is your business prepared?
There are three key trends that all leaders should be aware of as a new year approaches. Employer obligations, accessorial liability, taxation legislation and superannuation guarantee (SG) non-compliance have received a lot of attention in the last few months – and we’re set to see a continuation of this theme across 2018. So what key changes do employers have to look out for?
“New Single Touch Payroll (STP) legislation along with other federal government initiatives such as MyGov and SuperStream, are momentous leaps forward in the Australian government’s Digital by Default agenda,” says Eddie Megas, acting managing director, ADP Australia and New Zealand. “Not since the introduction of PAYG in 2000 have we seen a piece of legislation with this impact for employers and employees.”
So let’s explore some of the big questions about STP.
Will your business be STP-ready by 1 July 2018?
From 1 July 2018, STP will be mandatory for all substantial employers (those with 20 or more employees). Employers with 19 or fewer employees may be required to report through STP from July 2019, subject to the passage of legislation. All employers will need to do a headcount on 1 April 2018 to determine their obligation to report through STP.
How do employers benefit from STP?
There are a number of benefits available when you report your employer obligations through STP in a financial year, including:
How do employees benefit from STP?
- The obligation to provide employees and/or the ATO with payment summaries will be fulfilled through STP. This includes individual non-business, foreign employment income and employment termination payments payment summaries.
- The requirement for the employer to lodge a tax file number (TFN) declaration with the ATO will be removed.
- Validated employee data will be available to an employee through MyGov and to STP compliant solution providers.
- The STP report will be reported as year to date (YTD) balances and will allow employers to make adjustments (even for a prior payroll period) in future period reports. This feature potentially gives employers a lot of flexibility to correct errors and omissions in subsequent pay runs.
- The ATO will be able to recognise and deploy early assistance to employers struggling to meet their employer obligations.
- Activity statement compliance efficiencies will be obtained, such as: the removal of statistical labels from the activity statements for large withholders (gross wages and W1); and pre-fill of withholding related labels on monthly and/or quarterly activity statements.
The introduction of STP gives employees more control to monitor and actively manage their tax and superannuation balances including when using MyGov, both the superannuation choice and TFN declaration can be completed on ATO online. In addition, the ATO will make available to the employee: a drop-down list of all the superannuation funds the employee has a balance/account with the default fund(s) of the employer; and YTD payroll details, including superannuation balances and a consolidated view of all employers reporting for that employee.
STP and Superbad – what’s the connection?
The recent Senate Economics Committee’s review into SG non-compliance resulted in a report titled: Superbad – Wage Theft and Noncompliance of the Superannuation Guarantee
. There were a total of 32 recommendations proposed by the committee. Surprisingly, a significant number of the recommendations would involve legislation change and fairly fundamental changes to the way the SG system is currently administered.
A short while after the report, on 29 August 2017, the government announced a further package of reforms to give the ATO near real-time visibility over SG compliance by employers. The media release from Kelly O’Dwyer, Minister for Revenue and Financial Services, explained that STP will “reduce the regulatory burden on business and transform compliance by aligning payroll functions with regular reporting of taxation and superannuation obligations”.
The package includes measures to:
A collaborative effort is required for change in 2018
- Ensure superannuation funds report contributions received more frequently, at least monthly, to the ATO. This will enable the ATO to identify non-compliance and take prompt action;
- Improve the effectiveness of the ATO’s recovery powers, including strengthening director penalty notices and use of security bonds for high-risk employers, to ensure that unpaid superannuation is better collected by the ATO and paid to employees’ super accounts; and
- Give the ATO the ability to seek court-ordered penalties in the most egregious cases of non-payment, including employers who are repeatedly caught but fail to pay superannuation guarantee liabilities.
- Provide the ATO with additional funding for a SG taskforce to crack down on employer non-compliance.
2018 will bring significant legislative changes for business to implement. The change management
effort required for new legislation compliance should not be underestimated – nor does it fall squarely on the shoulder of one group.
“As a payroll solutions provider, ADP recognises that we play an important role in helping our clients better understand their employer obligations,” Megas says. “We all need to address the issue of compliance collectively to achieve a fairer working environment for all.”
WHAT DOES STP MEAN FOR EMPLOYERS?
To help ease your transition into STP and to reap the full efficiency and savings benefits, ADP has also launched a new service to help you get ready. To learn more visit adppayroll.com.au/stp
Here are key activities employers can start to work on now.
1. Review your processes
Given that STP is a move into the digital realm, is it time to review your HR and payroll processes?
How robust are your delegation processes for who can access, edit and authorise payroll? Is your employee commencement process very manual, with lots of pieces of paper floating around? Are employees still sending you an email with the hours they clocked for each pay period? How do you manage and validate this attendance data – as well as leave requests?
Jag Chugha, legal director, ADP Australia and New Zealand explains: “It is important to consider that the person managing the payroll run process may feel new pressure resulting from STP. Every time they run payroll and commit to the disbursements, the sending of the STP PayEvent puts an onus on them to ensure accuracy. As the sender, they are making the declaration that the file is true and correct and they are committing to the liability of the employer in regards to pay as you go withholding [PAYGW] and superannuation guarantee.”
STP could be a good trigger to help you streamline your payroll processes and to add some additional checks and balances.
2. Check the accuracy of your data
Many businesses manage inaccuracies in their payroll data as part of a big payroll reconciliation and clean-up process at the end of the financial year. Often, they are checking and rechecking their employee totals to ensure accuracy, even just before hitting the submit button on their Payment Summary Annual Report for lodgement with the ATO.
Now, however, every STP PayEvent could require this type of checking and correction. How will your business find the time to manage this? Unless you have the right process to prevent payroll errors, your effort and risk could increase.
Megas says: “It can be an error that seems very small but it will still be clearly visible. For example, using the wrong algorithm for the tax file number of an employee all year and disclosing an allowance as the wrong type. Now your employee is going to be able to see this error on a regular basis. An emphasis therefore needs to be put on ensuring your payroll data is as clean as possible at all times, as STP adds layers of transparency to your payroll reporting – both from an employee and ATO perspective.”
3. Educate and engage your employees
Talk to your employees about the benefits of STP reporting. If they haven’t already, they should look into setting up a MyGov account and linking through to ATO online. Without an account, they will not have the ability to review their balances and/or print their year to date summary.
You should also tell your employees what your chosen onboarding solution will be under STP. This includes how they can self-serve from the perspective of TFN declarations, superannuation choice forms and PAYGW variation forms. All the concessions that STP is aimed at achieving for an employer can be lost if employees continue to hand in incomplete and/or inaccurate forms, or if they are chasing you for a copy of their PAYG payment summary around 14 July each year.
ADP can help you assess your readiness for STP. Our consulting business can run an STP workshop designed for your business, helping you identify what you need to be ready to fully benefit from STP. To learn more and book an appointment, please visit adppayroll.com.au/stp