STP

ATO outlines STP Phase 2 changes

31 March 2021
Published in Bookkeeping News

Key changes being introduced under the Single Touch Payroll Phase 2 regime have now been detailed by the ATO, including categories of payments that employers will now need to report. Mandatory STP Phase 2 reporting is now set to commence from 1 January 2022, as the government looks to reduce the reporting burden for employers who are currently required to provide employee information to multiple government agencies. The expansion of STP will see additional information required to be reported each payday, building on basic salaries and wages information reported through the original STP regime that first began in 2018.

The Tax Office has now released a fact sheet for employers, noting that STP reports will soon need to separately itemise the components which make up the gross amount, including bonuses and commissions, directors fees, paid leave, salary sacrifice, overtime, allowances and gross (other).

Employers will also need to report whether an employee is on a full-time, part-time or casual employment basis, the tax treatment for PAYG purposes, and the reason for separation when employees leave. Income types and country codes will also need to be reported to make it easier for employees to complete their individual income tax returns. Salary-sacrificed amounts will also need to be included in an STP report, while lump-sum payments will be broken down into two different categories. Employers will also be able to provide the ATO with previous Business Management Software IDs and Payroll IDs where there has been a change in software or business structure to allow the Tax Office to fix issues with duplicate income statements for employees in ATO online.

Employers and practitioners have been advised that there is nothing they need to do at the moment as the ATO works with software providers to update their STP-enabled software.

Late super contributions: How much attention do you pay to the biggest item in your books?

4 March 2021
Published in Bookkeeping News

Author: Harry Hoang

In 2018, I had a chance to participate in a discussion with top Australian HR experts about payroll compliance. The discussion centred on how poorly HR has been managed in small and medium enterprises, leaving it a sizeable contributor to business failure.

From an accounting perspective, what could be an explanation?

Although there are many self-professed payroll experts, few have the experience and qualifications to consider themselves authorities on the issue. While many have a basic understanding of the relevant software, most fail to grasp the full implications of compliance with payroll systems and the subsequent transactions. Some business owners choose to forget experts altogether and attempt to manage their payroll themselves, usually using outdated and flawed methods. Alternatively, a few accounting and bookkeeping provide payroll services, but these tend to solely give out advice, leaving the actual process to business owners or their contractors.

HR and Payroll are immense problems that have been attracted very little attention from business owners. Believe it or not, we are currently looking after over 300 sets of books from businesses ranging from $50,000 to $20 million per annum and the biggest expense in their books is always salary and wages. Think back - if you spent 40-60% of your budget to salary and wages, how much did you really invest to make sure that it was managed properly? In our opinion, at least 1% of salary and wages should be invested HR, and a further 1% should go to payroll processing and compliance management. So if you have 10 employees receiving a salary package of $100,000 per year, you should put aside $10,000 for HR and $10,000 for payroll management, so as to ensure you are not only legally covered but also getting the best return on your biggest investment!

We also discussed with the expert the conflict that often exists when payroll experts attempt to give advice on HR matters and vice versa. In some businesses, HR 'experts' are going so far as to manage payroll and group certificates for their clients! We think that the world is moving toward decentralization, where service providers will specialise in their area of interest and refrain from giving advice in other areas. This enables collaboration between different experts to give you the best business advice possible for your enterprise.

Before finishing this topic, I would love to share some good tips to prevent mistakes in your payroll:

If you are investing less than 1% of your salary and wages budget into payroll, you are likely not getting the right return on your investments. You are also expos yourself to higher risk.
If your payroll system doesn't sync with your accounting system, please invest in the right payroll software like Xero or Keypay;
If your payroll clerk doesn’t spend a minimum of 10 hours in Continuing Professional Development each year learning all the updates and change to payroll compliance, you are increasing the risk of non-compliance in the workforce.
If your payroll system relies on one person who controls the process from data entries, there is a great vulnerability to fraud. Payroll duties should be segregated, with a minimum of 2 people checking and reviewing each transaction;
If you experience employee complaints regarding late or inaccurate wages, super payment or miscalculated leave, you need an expert to review the whole payroll system. Invest in it, because you will get great return!
If you have gotten a few letters from the Australian Tax Office about late lodgment of IAS or BAS, or overdue super and tax, you likely have a serious payroll issue. If, worse still, you got a letter from Fairwork Australia about incorrect pay or unfair dismissal, you could be facing serious consequences. As you are aware, paying superannuation contributions late, or not at all, according to Tax & Super Australia, it can turn into a very bad deal for your business. Most employers have little idea of how quickly late payment of superannuation contributions can increase to a cost that is multiples of the amount of the contributions paid late. Due to the introduction of STP and the finish of the SGC amnesty, we should all expect the ATO to be very active in following up on late paid (or not paid) superannuation contributions.

So invest 1% of your wage and salary in the best HR and Accounts personnel you can find - your books will thank you for it!