Two-and-a-half months out from the soft deadline on single touch payroll (STP) reporting for micro businesses a “concerning” number haven’t even heard of the scheme, new data shows.
A YouGov Galaxy survey of 517 business owners required to comply with the new regulation has found 70% have no idea what’s ahead of them and more than half (55%) have “little knowledge” about how to become compliant.
The research, commissioned by QuickBooks owner Inuit Australia, has raised new concerns about the readiness of the more than 700,000 businesses who will technically be required to implement STP reporting by July 1.
Described as the biggest tax change since the GST almost two decades ago, the introduction of businesses with 19 employees or fewer to STP will increase the size of the reporting regime many times over.
BDO tax partner Mark Molesworth says the figures should “concern” the Australian Tax Office (ATO), which is tasked with administering the scheme.
“Those numbers are stark,” he tells SmartCompany.
“Single Touch Payroll is an important compliance tool for the ATO — so to have such low recognition should be of concern for the administrator.”
Tony Greco, general manager of technical policy for the Institute of Public Accountants says the proportion of businesses who don’t recognise the term STP is “alarming”.
“The ATO couldn’t really do anything until it was law and now we’re in this mad rush — it’s unfortunate it took so long to get through parliament,” Greco tells SmartCompany.
The ATO says it’s taking a long view and will apply a soft-touch enforcement approach in the months after the official deadline, but tax agents remain worried many business owners aren’t getting the message.
The enforcement approach will give businesses a few months, until September 30, to begin reporting without penalty, while beyond that an exemption can be applied for.
The YouGov research found 30% of respondents were “concerned” about the prospect of STP compliance, while 25% said they were “anxious” and only 13% said they felt ready for the change.
Digital payroll software will also be required to be STP compliant, but the survey found only 44% of businesses are doing their books that way.
The tax office confirmed in February more than 300,000 businesses not already using digital payroll software will need to be onboarded onto the STP regime.
The ATO has sought to head off concerns about the ability of micro-businesses to adopt digital payroll software and pay the monthly fees associated with its use by commissioning providers to provide low-cost options.
MYOB, Xero and Quickbooks have responded by launching $10 per month payroll-only products for micro-businesses with one to four employees.
There will also be an option for businesses to adopt a quarterly reporting mechanism, at least initially, that won’t necessarily require payroll software.
But the ATO has been clear businesses will need to go digital in the coming years to remain fully compliant with the new reporting regime unless there are extraneous circumstances.
“We need all employers to end up with some sort of digital solution,” assistant commissioner John Shepherd told SmartCompany in February.
As SmartCompany revealed earlier this year, the ATO is even reaching out to the major banks to provide micro-businesses with an alternative to digital payroll software.
The tax office will be ramping up its engagement with businesses over the coming months, including reaching out to firms that will need to become compliant directly.
“We have been writing to all small employers who have 19 or less employees over the past few months providing links to more information on our website including fact sheets and Get Ready checklists. We also suggest that they work with their payroll software provider or tax professional in terms of what they need to do to get ready,” an ATO spokesperson said on Tuesday.
Although the implementation strategy is raising eyebrows, with complaints the ATO’s soft-handed approach to enforcement may prompt businesses to kick the can down the road, and others complaining there’s a lack of incentive to make the switch.
“There are a number of sticks being brandished at businesses to make them comply with STP, but we have seen no carrots on offer,” Moelsworth says.
“Businesses will be incentivised by the prospect of some small help to comply than will be scared into compliance by the threat of large penalties.”
The government had originally considered a payment or subsidy worth about $100 to incentivise businesses to jump on board, but this idea was ditched as non-consequential.
Greco says the cost of digital payroll software is a relative non-issue compared to the time investment required to make the switch.
“The cost of software is the inexpensive part, it’s the skill and the time to run it,” he says.