The taxman is workshopping ways to help small firms without digital systems adopt single touch payroll (STP) in an attempt to get ahead of concern micro-businesses may find it difficult to adopt the new system.
The Australian Taxation Office (ATO) has approached the market for suggestions on ways to develop a “fit-for-purpose” system to help businesses with less than 19 employees adopt STP reporting, suggesting apps, online solutions and “simple payroll products” may be created.
It comes ahead of an expected expansion of the STP regime, which will make the new reporting system mandatory for businesses with less than 19 workers.
The STP system has been mandatory for businesses with more than 20 workers since July 1 and there is legislation currently before the parliament to expand the system to smaller firms.
The reforms, expected to pass, are slated to set a July 1, 2019, implementation date for businesses with less than 19 employees, according to the ATO’s website.
It could add an estimated 730,000 new businesses to the regime, expanding it more than tenfold from the 45,000 or so which have already made the switch under existing laws.
“There’s a lot more smaller employers then there are larger ones,” ATO assistant commissioner John Shepherd tells SmartCompany.
Shepherd is encouraging businesses to get ahead of the curve and sign up for STP before any legislation passes and says the tax office has learnt from the initial wave of businesses that moved onto the system earlier this year.
The ATO released a range of extra measures to allow tax agents to lodge STP statements on behalf of businesses in September after it emerged thousands of firms had not made the switch several months after the deadline.
Compliance rates are increasing heading into the new year, but the sheer volume of companies with less than 19 workers needing to change to STP has sparked concern a rush to become compliant may emerge mid-way through next year.
STP requires businesses to report all salary information, including wages, deductions and super information, to the tax office at the same time, eliminating the need for employers to report Pay-As-You-Go withholding in activity statements throughout the year.
A “big step” for micro-businesses
Accountant Lisa Greig of Perigee Advisers says the change will be a “big step” for many micro-businesses which don’t have digitised payroll systems such as MYOB or Xero to streamline the process.
“The issue you’ve got is that there’s a high percentage of businesses doing things fairly manually,” Greig tells SmartCompany.
“Once you get down to two or three employees … it’s likely going to be manual.”
The tax office has put out an expression of interest campaign to identify ways to help businesses without digital systems make the switch, but Shepherd concedes there are no concrete ideas yet.
“We don’t know what these options will exactly look like just yet, there may be apps, online solutions and simple payroll products,” he says.
The tax office is also creating new online resources which it says will condense common issues and questions experienced by other businesses which have switched.
Shepherd says about 15,000 businesses with less than 19 workers have already moved over to single touch payroll.
“Do it when it’s the right time for you, but if your software is enabled for it then you should consider it,” he says.
Payments platforms are consulting with the ATO on a potential fix, but Greig points out that for micro-businesses, signing up with Xero or MYOB can also be an added cost.
“Payroll packages could be $30 bucks a month on top of what they’re already doing,” she says.
“Compliance is a cost to business and as this is another cost, we all know everyone will do it just in time for the deadline date.”
SME accountants could get caught in the middle
Stacey Price, owner of Healthy Business Finance, says she’s concerned her business will get caught in the middle in the coming months as smaller businesses try switching over to STP reporting.
“We’ve got some clients in their 50s and 60s and we’re saying ‘you need to be on a digital platform’. It blows their mind,” she tells SmartCompany.
“We’re getting pushback from clients, but the ATO is pushing us in the other direction, saying we need to get them on it [STP].
“I feel like it will be a big rush … I need to know that if I’m moving my clients to a digital platform that the ATO requires their system will be able to handle it,” Price says.
Price has called on the ATO to provide clarity on how businesses can participate in the single touch payroll regime without payroll software well ahead of any implementation deadline.