Tax

ATO negotiates with big banks on single touch payroll solution as more than 300,000 SMEs lag behind

Matthew Elmas /

The tax office is considering turning to the major banks to help implement Single Touch Payroll reporting for micro-businesses as it faces onboarding over 300,000 firms who aren’t using online or digital payroll platforms already.

Most businesses still doing payroll manually will be forced to adopt a digital system over the next 12 months after legislation passed earlier this week bringing firms with fewer than 19 workers under the Single Touch Payroll (STP) reporting regime.

Described as the “biggest compliance undertaking since the GST“, the influx of new businesses will expand the STP scheme twelve-fold, with more than 700,000 firms technically required to become compliant with the new system by July 1.

Following a tender process over the last six months, several accounting software giants, including Xero and MYOB, have released $10-a-month products aimed specifically at micro-employers looking to become compliant.

But in a bid to broaden the options available to businesses, the ATO has been discussing a possible digital banking solution with the major banks over the last 12 months.

While negotiations have yet to progress far enough to include the option in official ATO advice to micro-employers, assistant commissioner John Shepherd says discussions are ongoing.

“I can say there’s a good level of interest in looking at how they [the banks] can support small employers,” he tells SmartCompany.

A possible solution could involve tacking on STP-compliant digital payroll reporting to existing online banking infrastructure, allowing employers to leverage existing business processes.

The ATO has scheduled an advisory meeting next week with representatives from major banks and other payroll solution providers to canvass alternative STP options.

Westpac has confirmed it is working on expanding an STP solution for business customers which it will link to existing digital banking.

It will operate through Westpac’s existing QuickSuper system, which was created in response to the government’s SuperStream reforms in 2016, requiring employers to make super contributions electronically.

Emma Dobson, Westpac’s director of global transaction services, tells SmartCompany pricing has yet to be finalised but will be “competitive”.

“It’s a natural opportunity to be relevant to our customers,” she says.

An ANZ spokesperson said the company is looking at options.

“We are currently reviewing how Single Touch Payroll affects our customers and how we might best support them as this technology is implemented,” the spokesperson said.

NAB’s general manager of digital channels Brent Southey said it already supports payroll operations, similarly to Westpac.

“We continually engage with customers and stakeholders to obtain feedback, which is vital in helping us determine what improvements we can deliver to make life easier for our customers,” he said in a statement.

No manual option

The ATO has undertaken an engagement campaign with micro-employers who have payroll products over the last few weeks in a bid to boost compliance ahead of the July 1 deadline, managing to get 18,000 smaller employers on board already.

After the new legislation is given Royal Assent in the coming weeks, it plans to contact businesses without digital payroll products to canvass their options.

“We need all employers to end up with some sort of digital solution,” Shepherd says.

While exemptions will be available for businesses with limited or no access to the internet, all other firms will be required to adopt some form of software accounting to comply with STP reporting.

However, Shepherd says the ATO won’t be penalising businesses who aren’t compliant within the first 12 months.

“It is a big change … we’ll be flexible and pragmatic and there will be an ability for those who need more time to get more time,” he says.

“We expect adoption to be a bit staggered over the next 12 months.”

The ATO is also creating a deferral program, which businesses who aren’t compliant will need to sign up to by September 30 in order to avoid any enforcement action.

“Kick in the guts”

But small-business accountant Stacey Price, owner of Healthy Business Finance, is disappointed the ATO is being so lax, saying they’re stymying efforts to get business owners to change their ways.

“Them saying they’re not going to enforce it is really a kick in the guts to us,” she tells SmartCompany.

“The first thing our clients are asking is ‘why?’ If the ATO isn’t enforcing it, why should they sign up?”

Price says an online banking payroll product could be “great in theory” but may run into some practical issues.

“They don’t always pay wages from the same bank account, we have a lot of small operators who just don’t have the funds to pay payroll on a date, so they pay half from the business account and half from a personal account,” she explains.

An opportunity for more

Instead, Price says she’s using STP compliance as an opportunity to try and get business owners without digital solutions to adopt a more comprehensive change in their accounting practices.

“It’s an opportunity to get business owners to do much more than just STP. If you’re going to pay $10 a month you may as well pay $30 and be able to do more,” she says.

But there are still plenty of challenges.

“We still have businesses out there giving staff little brown envelopes with cash in it every week,” Price explains.

“We’re now saying to people they need to pay for software.

“There are a lot of  business owners who are going to get really angry, really quickly.”

In an attempt to ease the burden on micro-employers, the ATO plans to allow those with fewer than four workers to submit STP reports quarterly for the first few years.

Do businesses need a carrot?

BDO tax partner Mark Molesworth says there are challenges for both the ATO as the regulator and businesses themselves in getting STP reporting for smaller employers over the line in the coming years.

Drawing a parallel with grants handed out to small businesses when the GST came into being under John Howard, he asks whether micro-employers aren’t being offered enough of a carrot.

“The government hasn’t thought enough about incentivising those small and micro businesses to come into the program,” he tells SmartCompany.

“At the beginning of the GST, there were $300 grants provided to help businesses get ready.”

Molesworth says the ATO’s focus on providing businesses with as many options as possible to become STP compliant is helpful and will be “appreciated” by the small business community.

NOW READ: “Biggest compliance undertaking since GST”: Everything you need to know about the new single touch payroll laws

NOW READ: ATO outlines new digital approach as it takes tax digital

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Matthew Elmas

Matthew is the news editor at SmartCompany. You can contact him at [email protected].

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