As a bookkeeper, helping clients make the transition to the new STP reporting requirements is a big job. BAS agents and accountants alike are only just finding their feet during implementation phases, so navigating all the information and helping clients can often be full of uncertainty.

Similarly, business owners are unsure of how these new reporting requirements affect them and even if they are required to now report, and if so, how. A lot of the information online uses rather ambiguous language and isn’t very clear, while seeking out advice can often be time consuming or expensive.

So, as a business owner, what do the STP reporting requirements mean for you? Let’s take a look.

Who has to report

If your business employs MORE than 19 employees

If your business has 20 or more employees then you should already be filing STP each pay run, and have been doing so for over a financial year. If your business fits this bill and you are not yet filing STP you need to discuss this with your BAS agent or accountant. If your business is only reaching this number now, this is not a problem and you will need to make sure that you are getting your STP sorted before the transitional deadline (more on that next).

If your business employs 19 or LESS, but MORE than 4

If your business employs more than 4, but up to or less than 19, it is time to get sorted for STP. The transitional deadline for this is 30th September 2019.

If your business employs 4 or LESS

If you are a micro employer, that is, you employ 4 or less in your business, there are some additional options available to you. While you still have to report STP, you may have the added option to report these figures quartlery through your BAS or tax agent.

How you report

In most cases, with the exception of micro employers and closely held employees (more on that later), you will need an STP enabled payroll solution. Accounting programs such as Xero, MYOB and Quickbooks offer STP solutions to help businesses transition easily.

Once you have enabled STP in your file, every time you complete a payrun, you need to ‘file’ that pay with the ATO. In the case of Xero, it is as simple as clicking the green ‘file’ button at the bottom of your pay run screen. You must ensure that your file and login is connected to the ATO via your SSID to be able to file your pay runs.

What data is collected?

Each time you file a pay, the ATO collects data about your employee’s wages, PAYG withholding and super entitlements. It runs on a year to date basis, so each pay you file essentialy overwrites the previous one with the new data.

Remember, there are no changes to the way you make payments to your employees and you must continue to provide payslips as a legal requirement.

What to do if you are not ready to start STP reporting

For employers with 19 or less employees, you must start reporting prior to the 30th September 2019 deadline. If you do not think you will be ready, then you will need to apply for a deferral.

If you pay more than 20 employees, you should already be using an STP enabled solution or have a deferral in place. If not, you must you must request one as soon as possible.

Are you a closely held employer?

This is the term that seems to be tripping a lot of business owners and a lot of advisors up. Because many business set ups are unique, the definition as to what constitutes a closely held payees. Broadly speaking, a closely held payee is defined as one that is ‘not at arm’s length’, that is, they are directly related to the payer (business). This could include family members in a family business, directors or shareholders of a company or even beneficiaries of a trust.

Closely held payees are not required to be reported through STP during the 2019-2020 financial year. This deferral is automatic and you do not need to apply for it, however if you employ a mix of arm’s and non arm’s length employees, the transitional deadline (or approval deferral) applies for those that are at arm’s length to your entity. While you are not required to report closely held employees at this time, you may do so and will not be penalised for beginning STP reporting early. From 1st July 2020 you will also have the option to report closely held payees quarterly, in line with your BAS reporting. If this is an option that your BAS and/or tax agent feels would be beneficial to your business, then you will need to advise the ATO that you wish to take up this option.

If you choose not to report STP for closely held payees, you will still need to provide them with a payment summary and lodge a PSAR at the end of the financial year.

Remember, if you are ready for STP, and have a mix of closely held and arm’s length employees in your business, talk to your BAS agent or tax agent about the best way to handle STP reporting for your business.

Payment Summaries

When you start reporting your payroll each time you complete a payrun, data is automatically sent to the ATO about your employees. This means that if you start reporting in the 2019-2020 financial year, you will not have to generate payment summaries or lodge a PSAR with the ATO. Moving forward, you will need to complete STP finalisation through your software and file this to alert the ATO that you have completed your payroll for the financial year. Once this year end report is accepted by the ATO, your employees will see their income statement inside their MyGov account change to ‘tax ready’ so that they can complete their tax returns.

Each individual employee should have their own MyGov account that is linked to the various servies that they use, including the ATO.

If you make a mistake

If you file a pay run with incorrect data, there are ways to fix it. Your BAS agent will be able to amend any errors and re-file the pay run for you, or offer you some training. Depending on your software package, there is often great help guides and resources available to you.

Provided you amend the error in a timely fashion, you should be able to avoid penalties.

Next Steps

If you employ others and you are not yet set up to begin STP, you must start getting ready. If you need assistance, contact your BAS agent, tax agent or request a free consult with us via our contact page.

The ATO also have a handy checklist to help get you sorted and on the way to full STP compliance.

It does seem like a big job to begin with, and it can be a little fiddly, however STP enabled software has made the experience a lot easier and manageable. BAS and tax agents will be able to assist you and many have undergone lots of training to be able to guide you and your business moving forward.