ICB Definitive Guide to Single Touch Payroll - FINAL · ICB Definitive Guide to Single Touch...

ICB Definitive Guide Single Touch Payroll

Edition 1 January 2017

All updates available at: www.icb.org.au/STP

ICB Definitive Guide to Single Touch Payroll

Edition 1 Published January 2017

This is an ICB publication. It is based on information known from part of the ATO consultations, information, public briefings and the design process. While based on law and Ministers released information, it is not necessarily the final position nor the reflective of what may be the final ATO implementation and requirements. This edition is the best information available at the time of publication. Updates will be available at www.icb.org.au/STP

Acknowledgement of ATO The Single Touch Payroll project has the involvement of various levels of Government. The respective Assistant Treasurers, working with Treasury and the implementation agency of the Australian Taxation Office. The ATO commenced consultations on this project in 2013 and should be commended for their intense engagement with key stakeholders. Business and Bookkeepers through the community of members of ICB (amongst others) have ensured that Government consider the impact of this regime on employers and their advisors.

Limitation of Liability

The material contained within this manual is designed to provide information for bookkeepers and business.

We note that different circumstances might apply from Bookkeeper to Bookkeeper and situation to situation.

Before you rely on this information for any important matters you should make your own enquiries and validation to ascertain if it is appropriate and correct to your circumstances.

All rights reserved.

No part of this manual maybe reproduced or copied in any form or by any means (graphic, electronic or mechanical, including photocopying or by information retrieval systems) without permission in writing from Institute of Certified Bookkeepers.

ICB may take legal action against a person who infringes on their copyright through unauthorised copying.

Copyright © 2017 Institute of Certified Bookkeepers Pty Ltd

_______________________________________________________________________________________Single Touch Payroll (January 2017) ©TheInstituteofCertifiedBookkeepers Page3

Business Information Sheet .......................................................................................................... 5 Implementation Timeline ............................................................................................................... 6 Introduction ..................................................................................................................................... 7 A Simple View ................................................................................................................................. 8 ICB Policy Position on STP ........................................................................................................... 9 Important Concepts ...................................................................................................................... 10 Why STP? ..................................................................................................................................... 12 Your Approach .............................................................................................................................. 14 Templates .................................................................................................................................. 16 A Guide for Business ................................................................................................................... 17 Payroll Process and Development with an STP Program...............................................................18The Detail ...................................................................................................................................... 22 Legislation ................................................................................................................................. 22 Technical – What the Software must do for you ........................................................................ 23 Technical – What the Government Must Deliver ....................................................................... 24 STP Processes .......................................................................................................................... 25

a.) Onboarding/Commencement of a New Employee .......................................................... 25 b.) PayEvent ......................................................................................................................... 25 c.) Annual Reporting ............................................................................................................. 31 d.) Superannuation Payment Reporting ............................................................................... 32

When to Start with STP ................................................................................................................ 33 Reconciliation and Corrections .................................................................................................. 34 ICB Submission Reconciliation & Correction ............................................................................ 35 Compliance Action by the ATO ................................................................................................... 41 ICB Submission – ATO Compliance Actions ............................................................................. 42 What if You Cannot Report to STP? ........................................................................................... 43 Software Companies .................................................................................................................... 43 Authorisation & Declaration ........................................................................................................ 50 Bookkeeping Process Impacts ................................................................................................... 51 Project Status ............................................................................................................................... 22 ICB Confidence Level................................................................................................................... 53 STP - Frequently Asked Questions............................................................................................. 54

Table of Contents


Glossary and Additional References .......................................................................................... 60 Appendix ....................................................................................................................................... 61 ICB Resource: Commencing a Process Payroll ....................................................................... 61 ICB Resource: SuperStream .................................................................................................... 61 ICB Resource: PAYGW Obligations of an Employer ............................................................... 63 New Employee Checklist ........................................................................................................... 65 The Cash Flow Debate .............................................................................................................. 67 History of the Journey ............................................................................................................... 71 ATO Consultation Framework ..................................................................................................... 78

Further Resources

ICB • http://www.icb.org.au/Single-Touch-Payroll

ATO • https://www.ato.gov.au/About-ATO/About-us/In-detail/Strategic-direction/Simpler-reporting-

with-Single-Touch-Payroll/• http://lets-talk.ato.gov.au/

Legislation • https://www.legislation.gov.au/Details/C2016A00055


Your Payroll seen by the ATO ….. All Year The Single Touch Payroll (STP) legislation has received Royal Assent. It is law and is going to happen!

Who? All “substantial” employers, (20 or more employees by headcount), must participate.

§ The count happens as of 30 April each year, commencing 2018.§ You must then enter STP as of 1 July 2018 or the July following achieving 20.

Anyone can elect to enter STP earlier. Smaller employers may volunteer to use STP: The ATO are undertaking further research before Government consider making it mandatory.

What? You submit payroll and superannuation data to the ATO each “PayEvent”. A PayEvent is each time you pay someone and should be generating a pay slip. Some of the data on the pay slip is now sent to the ATO:

§ The year-to-date totals of gross wages and gross tax for each employee being paid.§ The amount of Superannuation Guarantee (SG) that has been accrued.

Superannuation payment information is also sent at the time of paying your Superannuation Guarantee Contribution, (SGC).

How? Your payroll software should do it all for you. If you do not have accounting software or internet, the ATO are considering other reporting mechanisms.

When? The ATO is required to be ready to receive STP information as of 1 July 2017. Substantial employers must provide STP information from 1 July 2018. Other employers are not required to provide STP information at this time. Any employer can enter STP as soon as they are able.

Why? § The ATO will gain greater visibility of all employers, enabling earlier activity to ensure the

employer is paying their PAYGW and their SGC.§ The employer will no longer be required to provide payment summaries to their employees.

The ATO will provide them.§ The ATO will prefill tax returns with the payroll information.§ The ATO will make the payroll information available to employees all year through myGov.

Future The ATO will streamline the process for a new employee by automating the Tax File Number Declaration and SuperChoice form into payroll software and myGov.

Business Information Sheet Single Touch Payroll

_______________________________________________________________________________________Single Touch Payroll (January 2017) ©TheInstituteofCertifiedBookkeepersPage6

Important The employer’s payroll records are always the “source of truth”. Therefore, any amendments to past pays, or any fixes required are updated in the employer’s systems and records. At the next PayEvent the ATO will receive the updated YTD information. There is no need to go back and amend past PayEvents. The employer will still have to “finalise” a payroll year by indicating to the ATO that the information they are now being sent is the final version and can be used for tax returns. Implementation Timeline Dates to Watch Out For

Consider your payroll systems and streamlining process to meet the STP Reporting requirements Now

Legislative Instruments prescribing the form of Data required by STP (14 parliament sitting days required following the tabling of the LI) TBA

ATO to be able to receive STP submissions 01 July 2017

All employers can commence STP if they wish to as from ATO readiness

Employers to check headcount as of (if 20 or more then must commence STP as from next 1 July)

01 April 2018

Commence implementation of STP compliant software 02 April 2018 STP commences for substantial employers - PayEvent reporting commences at this date.

01 July 2018

Small Employer research and recommendation to be considered 2018


This guide is to provide bookkeepers and businesses with the ability to understand:

§ What Single Touch Payroll (STP) is. § What an employer must do and when. § How to comply.

The Institute of Certified Bookkeepers is a professional association of Bookkeepers helping Bookkeepers helping Business. Single Touch Payroll is an initiative of Government affecting every employer and arguably every employee. This guide will take you into an understanding and then practical implementation steps based on what is being implemented in the foreseeable future. This guide will be updated from time to time and you can stay right up to date with any changes that affect you through connecting with the ICB.

§ Members: www.icb.org.au/Resources/Payroll/Single-Touch-Payroll § Bookkeepers: www.icb.org.au/membership § Businesses: www.icb.org.au/Who-Are-You/Business-Owners/Benefits

Introduction


Every employer is endeavouring to meet all their employer obligations under Fair Work and ATO, (or should be). Every employer has a payroll system of some sort that is regularly producing payslips and end of year payment summaries and calculating Superannuation Guarantee and PAYGW calculations and arranging payment. None of the above changes really. STP has come along and what it does (or should do) is provide visibility to the regulator and also the employee, of what the employer is doing. The data (payroll info) that the employer creates anyway will now be sent to the ATO periodically. Note that the employer’s records remain the source of truth. If the ATO has a problem or finds an error, the employer can fix it next time. There is no need to ever reconcile to what has been submitted to the ATO, simply verify the employer’s records and submit the current copy of the source of truth, (the information in the employers system), to the ATO. The ATO information is then updated. Superannuation Guarantee (SG) payments are already submitted to the SuperStream system and the ATO will now get a copy of the payment information. STP means the accruing of an SG obligation will be seen by the ATO in the PayEvent information and the periodical payments will offset that obligation. The ATO has an obligation to follow up with action on the information provided or not provided. The ATO should, with STP, be able to catch the crooks earlier. The ATO should, with STP, be able to leave the compliant guys alone. As to benefits for employers, we are yet to be convinced. As to benefits for employees, we are yet to be convinced. Unless it is catching the crooks.

A Simple View


ICB are supporters of the concept of a Single Touch Payroll. We support the discussion and development of Single Touch Payroll and ICB seeks to continue our engagement with and to assist in the implementation of a successful and appropriate STP program. We completely support the development of a software integration with some government services that assist employers to manage their payroll more efficiently. We are concerned that government has not given sufficient credit or time to recognise the current well developed state of payroll process and software as it already exists. The further development of software to assist employers to be more efficient, including their interactions with Government, should be encouraged and we believe can be implemented without significant negative consequences. It should be noted that the ATO STP proposal does not remove any complexity for an employer. The bookkeeping, record keeping, HR and payroll complexities remain in place for all employers. The STP discussions have not adequately recognised the ongoing obligations that Fair Work places on an employer. We are surprised that Fair Work has not been involved in the development of the proposal. We support an enhancement to government systems to allow more effective and efficient “onboarding” (commencement) of a new employee by an employer. We also support a better process replacing the current TFN Declaration and the SuperChoice systems and forms. This should be facilitated through Government enabling Business Management Payroll software as a priority. The involvement in a new myGov information process should be secondary. We support the increased visibility that will be provided to government, through STP. The ATO will have more timely information and therefore an ability to monitor and react to the behaviour of employers. This requires an appropriate compliance approach by government to follow up employers who are not meeting their obligations. We support the approach that the current SGC and PAYG Withholding payment cycles should not be altered. Payment should NOT be brought forward for any employers. We do consider that it is appropriate to consider earlier payment requirements for employers who have a proven history of non-compliance. We propose and support significant transitional considerations. We support and require the approach that the employer’s records are the source of truth and the information provided to the ATO can be updated by the employer. It cannot be a requirement to reconcile back to whatever information the ATO has. It remains a requirement to have correct records with the employer.

ICB Policy Position on STP

ICB Policy Position on STP


1. It is happening. It is Law and commences for some on 1 July 2018.

2. “PayEvent” is the trigger for a requirement to report data to the ATO. It is the event of

paying an employee. The employer has a requirement to pay the employee, a requirement to provide a payslip and now has a requirement to advise the ATO of pay information.

3. “Year to Date” values for each employee being paid is required.

4. “Source of Truth” is a design principle behind STP that at all time it is the employer’s current records that are considered the “source of truth”.

This has very deliberate consequences, (all positive), for the employer. If the employer needs to amend a pay event, within the current financial year, they do so in their own system and, (subject to thresholds), will NOT need to amend the previous information sent to the ATO. No amendments to PayEvents. The next PayEvent reporting will included the updated “year to date” information for that employee and therefore will include any amended values.

5. “Reconciliation” with the ATO STP information is NOT required. Because you are able to

update the ATO information at the next PayEvent with the new Year To Date values, it is the employer’s own system, (the “source of truth”), that must be verified and the employer’s records would be the ones subject to any further review. The previous STP submissions to the ATO are not, prima facie, relevant and do not need to be amended. Previous BAS or large employer payments may need to be amended.

6. “Prefill of the BAS” by the ATO with the values for W1 (gross wages) and W2 (tax withheld) will be provided on each BAS but can be overridden without consequence. The ATO has the information based on what has been submitted. The employer’s records are the ultimate source of truth so may be different, i.e., including amendments.

7. Superannuation payments are also required to be reported as part of STP. Employers are

already reporting payments into the SuperStream system, therefore the design is that STP will receive and process based on the same message.

8. Cash flow does not change under STP. You may pay early if you wish but STP does NOT

require you to. You may pay according to existing schedules. For the PAYGW tax: Large withholders (>$1m PAYGW per year) continue to pay weekly; Medium withholders ($1m < $25,000 PAYGW per year) pay monthly; and Small withholders pay quarterly. For your super guarantee payments, the SGC law remains at quarterly, other workplace arrangements may require more frequent payments.

9. “Finalisation” replaces the previous submission of EMPDUPE files, (copies of payment

summaries), to the ATO. By sending a “Finalisation” STP submission, you will be telling the ATO that the data they now have, (as part of that finalisation submission), is to be considered final and can be entered in Income Tax Returns. “Finalisation” must happen by the 14th July.

Important Concepts


10. “RESC” and “RFBA” reporting obligations continue and would be provided to thegovernment as part of the “Finalisation” process.

11. “Amended Finalisation” allows you to resubmit “Finalisation” data for an employee or allemployees, if an amendment is required after a “Finalisation event”.

12. The ATO will have immediate information and therefore will implement a more rapid followup strategy.

a. The ATO will be using “soft touch” enquiry if they see an issue with the STP databeing provided.

b. They will use a stronger and quicker compliance strategy for non-compliantemployers.

13. No increase in work load. It is a design principle that STP is to leverage off the naturalbusiness systems of a compliant effective employer. Accordingly, if the employer isperforming payroll correctly and complying before the introduction of STP, then STP shouldnot increase or add any additional work.

14. Nothing can stop the employer from paying the employee as required. Nothing in the STPreporting system can prohibit or restrict or in any way hinder an employer’s natural businesssystem of being able to pay the employee as required by other Law. If the ATO computer isunable to accept the information or the internet is not working the employer must still beable to do payroll and the next payroll.


What is the reason behind STP? What is STP aiming to achieve? The ICB has recommended concepts such as

“supporting employers using best practice and enhanced and easier compliance for employers.” and “The ATO are seeking to facilitate enhanced but also easier compliance reporting and possibly payment systems for all employers. The proposed “Single Touch Payroll” system would change the way an employer interacts with the ATO in relation to SGC and PAYGW obligations. STP includes enhanced reporting of employee payment activity enabling earlier detection and action to employers who fail to meet their obligations”

We remain very concerned that the basis behind the ATO STP is that it will help resolve PAYGW liability (debt) issues and also SGC issues. In our opinion this view, based on an enhanced reporting obligation alone, is unfounded. The ATO must implement a stronger compliance program behind those taxpayers who do not comply with current obligations rather than increasing the obligations on all. The first consultation/discussion paper by the ATO presented the following:

“Currently, the ATO does not receive reporting information to identify that employers have paid the correct amount of employee super by the due date. Instances where businesses have decided not to do the right thing, and not pay employee super payments, may often go undetected for some time where the employee does not complain. These businesses create an unfair commercial advantage for themselves at the expense of other businesses that do the right thing. This is especially unfair on employees where recovery of unpaid super amounts is delayed or, in extreme cases, no amounts are recovered due to the insolvency of the business. “

The Law (Explanatory Memorandum) explains as follows: This Schedule contains a suite of legislative amendments to create a new modern reporting regime for providing payroll and superannuation information to the ATO.

To complement this reporting regime, the Schedule also contains amendments allowing the ATO to enhance their digital service offering for employers in relation to processes associated with bringing new employees onto their payroll. This includes enhanced TFN validation services, which will provide employers with confidence that details they hold about their employees matches the information held by the ATO for that employee.

Collectively, these amendments are designed to reduce the compliance costs for employers of meeting their PAYG withholding and superannuation obligations, whilst also improving the ATO’s ability to monitor employer compliance with their SG obligations. “

GreaterVisibility STP will provide government with greater visibility of:

a) what employers (who report) are doing b) which employers are not reporting

Why STP?


Government will also now see the behaviour of employers around accruing and then paying SGC and PAYGW. STP will bring forward the ability of government to monitor non-compliant or struggling employers and to provide appropriate assistance or “encouragement”. (ICB support the increased more frequent visibility on the basis that the ATO will appropriately and rapidly follow up what they are seeing). The Government provide the following outcomes: Outcomes that ICB agree are possible:

§ Better “commencement of new employee” process (streamlined TFN Dec and SuperChoice process)

§ Greater visibility to Government of employers who are NOT meeting their obligations enabling quicker and appropriate compliance action

o Super gets paid o PAYGW gets paid

§ Encourages development of better digital interactions in the entire payroll function § ATO will monitor and advise employees about their Superannuation Contribution caps

Outcome that ICB are yet to see as possible or even likely:

§ Less red tape § Less regulatory burden

WhatElseWillChange?

1. The end of year process will only be changed as far as the method of submission to the ATO. In recent years we had to send our end of year payment summary to the ATO electronically, mostly an EMPDUPE file lodged through software or ATO portals.

In STP you will send aa “finalisation message” that includes the final data. In effect the EMPDUPE file into a different computer at the ATO. Previously EMPDUPE files could be submitted to the ATO by the 14th August, after providing payment summaries to the employees by the 14th July. The finalisation message must be sent by the 14th July. “Finalisation” can be amended.

2. Payment Summaries will not need to be provided in the ATO format to employees by employers; in fact, allegedly the employer doesn’t have to provide anything to employees. We do not believe this will be effective for a number of years.

In STP the ATO will provide the Payment Summary to the employee, based on the “Finalisation data”

3. Allowing early payment of PAYGW to the ATO and SGC if an employer wishes to manage their cash flow in this way. We note this is NOT a requirement.

4. The ATO will now prefill each BAS for (appropriate) employers with the W1 (gross wages)

and the W2 (tax withheld) amounts based on the information provided in the STP transmissions. These amounts can be overwritten. (ICB remain dubious of the ability of the ATO to provide this accurately and to include end of period payroll data as well as we don’t perceive any benefit).


A guide for ICB Members

Be the first to be ready STP will provide another reason for everybody who knows your business/es to claim that they are the ones to help solve the STP implementation, therefore:

§ Understand today’s best practice payroll systems

§ Understand what STP is o Read this Definitive Guide o Watch the recorded ICB Single Touch Payroll Webinar o Undertake the ICB Single Touch Payroll accreditation

You should be the first. Bookkeepers typically are the ones who know the business operations in the best detail and therefore can interpret the new system and apply it to each business appropriately.

§ Provide each business with the ICB Business Information Sheet on STP § Review how each business is currently performing its payroll § Understand how each software you work with is going to implement STP § Schedule a briefing and recommendation session with each business § Schedule when STP must be implemented for each business

What’s in it for Bookkeepers

§ NOCHANGEtoreconcilingpayrolleachquarterbeforeBAS.

§ Allemployerswillrequiresometypeofelectronicpayroll/accountingsoftware– increasedbusinessforbookkeepers

§ ATOarelookingintoanothertypeofserviceifEmployerisnotcomputerised.Ie.AustraliaPostorAgentslodgingonthebehalf

§ NOCHANGEtoEOYreconciliationbesidesATOemailingemployeespaymentsummaries

– ‘FinalIndicator’issenttoATOaspartofEOYprocess

Your Approach


StayuptoDate STP will continue to develop. We have already heard about STP stage 3 (and we haven’t even implemented stage 1 yet). The Government will progressively implement STP and each step of implementation may change how payroll works for employers.

§ Stay connected with ICB § Receive the ICB newsletter

Be Ready

§ When your software has an STP enabled payroll be ready to implement it. Despite what you may hear….

Single Touch Payroll does NOT § Remove any normal reporting obligation upon employers § Automate any part of the employer’s obligations § Simplify or streamline payroll An employer must still § Obtain a SuperChoice form (or use a default fund) § Obtain TFN Declaration information § Comply with Fair Work requirements § Issue payslips § Pay employees, pay super, comply with SuperStream, pay the PAYGW

Good payroll software will help achieve all of the above outcomes and also meet your STP reporting obligations. STP should motivate more employers to use good payroll software. Bookkeepers should be the ones recommending what software the business should be adopting. Bookkeepers’ImplementationofSTP If the Government get the concept, design and implementation from their side correct, this will enable the software companies to deliver a better customer experience in everything required to be performed to comply with payroll obligations. As bookkeepers, our role is to understand what the law is requiring, how the Government have then implemented the system, utilise software that embraces STP in a better process and then help each of our businesses become more effective and more efficient as part of embracing the new system. Bookkeepers therefore should:

1. Understand what data is now being sent to the government each PayEvent. 2. Understand what STP requires in terms of commencement of an employee,the finalisation

process at the end of the year and seek to use the software that embraces this system. 3. Understand how the software you use has implemented STP. 4. Understand and implement new procedures in the software for commencement of an

employee. 5. Understand and perform the STP end of year “Finalisation” process delivered by the

software to embrace STP 6. Provide each business with an understanding that you are an expert in STP and STP

enabled software and that you will be using the new enhanced system for their business.


Templates At the time of publication, the technical specifications and processes have not been completed. The following templates are envisaged and indicative of best practice requirements based on our understanding of how STP will be implemented. Updates available on ICB website: www.icb.org.au/singletouchpayroll

1. Using myGov a. Explanation information to the employer b. Employer authorising the establishment and use of the myGov connection c. Explanation information to the employee d. Employee authorising the employer to receive the information

2. Using BMS (Business Management Software) a. Employer providing authorisation to the bookkeeper b. Explanation information to the employee c. Authorisation from employee to include

i. Authority to send payslips and other information electronically ii. Acknowledgement that Payment Summaries will be provided by myGov

3. Employee induction pack


Be informed and not misled STP will provide another reason for everybody who knows your business/es to claim that they are the ones to help you solve your STP implementation.

§ Engage an STP accredited ICB member to assist you. § Understand what STP is by reading this Definitive Guide

Bookkeepers typically are the ones who know your business operations in the best relevant detail and therefore can interpret the new system and apply it for you appropriately.

§ Understand the ICB Business Information Sheet – now § Review how you currently perform payroll processing § Understand how each software you work with is going to implement STP § Schedule when STP must be implemented

Stay up to date STP will continue to develop. We have already heard about STP stage 3 (and we haven’t even implemented stage 1 yet). The government will progressively implement STP and each step of implementation may change how payroll works for employers.

§ Stay connected with ICB § Receive the ICB newsletter

Be ready

§ When your software has an STP enabled payroll be ready to implement it Despite what you may hear…. Single Touch Payroll does NOT

§ Remove any normal reporting obligation upon employers § Automate any part of the employer’s obligations § Simplify or streamline payroll

An employer must still

§ Obtain a SuperChoice form (or use a default fund) § Obtain TFN Declaration information § Comply with Fair Work requirements § Issue payslips § Pay employees, pay super, comply with SuperStream, pay the PAYGW

Good payroll software will help achieve all of the above outcomes and also meet your STP reporting obligations. STP should motivate more employers to use good payroll software. Bookkeepers should be the ones recommending what software the business should be adopting.

A Guide for Business


The ICB explanation of the concept “Your payroll seen by the ATO …. All year” An initiative of Government as part of the enabling Digital by Default policy for the improvement of Business process in Australia. In the below we outline a complete payroll process required by an employer from the requirement to register through to cessation of an employer. We outline this payroll process within the context of an STP development, which may or may not include elements of the ATO proposal. Included is comment as to the warranted and envisaged, (if not under construction), enhancements to commercially available payroll software that we are aware of and should be delivered with or without the ATO STP proposal. Please note that this explanation is of current processes and ideal processes which may or may not be what is proposed by the ATO and may or may not be part of STP. We will update this report on our website. Status Dashboard achieving an ideal “Single Touch Payroll” world.

Positive - Not perfect Underway - Not there yet

Significant Work Required Required - Not yet observed

Out of Scope Included in STP Developments 1. Registration (ABN, TFN, PAYGW)

§ Recent changes to the ABR and the registration process to automate and simplify registration towards a “Single Touch” registration should be acknowledged and continued.

2. Registration (Superfunds, SuperStream, Super Clearing House)

§ Current implementation of SuperStream by the software (and their links with clearing houses and payment gateways) is heading towards an employer being able to establish SuperStream compliance within the software in a streamlined approach.

3. Acquisition of Payroll Knowledge (Internal or Consultant)

§ Payroll is complex: Fair Work and tax and super. Employers must seek professional help to ensure they understand the law, understand their obligations and implement system to comply, as the consequences are dire.

Payroll Process and Development with an STP Program


§ Alternatively, if the system was to provide certainty / safe harbour to employers basedon engaged actions to establish correctly then the cost and burden of acquisition ofappropriate knowledge may be reduced.

4. Establishment of Software (Acquisition, Training, Setup)(Alternative non-software system set up)

§ Software establishment and training is established (varies brand to brand)

§ Employers should be supported in their acquisition of software and then in ensuringcorrect establishment of the system in the software.

§ Payroll in Australia does not apply to each employer the same way hencecustomisation is always required. It is false to expect software will ensure compliance.Effective communication of the requirement to seek expert assistance should bepromoted.

5. Engage Employees

a. Interview and offer process b.

b. Employment contract a.

§ Although we rank these as out of scope, increasingly HR software that assists theseprocesses is coming to the market. A truly “Single Touch” payroll process would integratethis process with the engagement of an employee

c. Employee details to be acquired (“Commencement”) a.

i. Award details to be determined and applied ii.

iii. TFN Dec information iv.

v. Super Information vi.

d. Establish employees in the Payroll systema.

§ Different brands are at different stages of what we would refer to as best practice andefficient business process. Further development is required. STP should drive a digitalinterchange of information that further facilitates this process.

6. Receive Pay Run Processing Instructions

§ Different brands are at different stages of applying best practice and efficient businessprocess to various different business circumstances.

§ In a full STP world automation of the information and authorisation processes will bemore “digitally” facilitated. Similar to current developments in the Purchase Invoicerecognition and processing procedures, we believe pay run information should follow asimilar process.

7. Process Pay Runa. Calculate gross amounts to be paidb. Apply taxes etc. c.

c. Verification and authorisation to make payments d.


d. Payslips to be provided to the employee e.

e. Payment instructions for the employee’s net pay, (preferably through payment gateway in the software), and make payment

f.

§ The payment instructions through a gateway functionality exists in different software through a variety of different methods. In a true STP world we look for “a”, “b” & “c” to be one set of procedures that generate a set of reports provided to the “authorised person” in the business to then authorise the processing of the payroll.

§ Following authorisation we look for STP button to facilitate “d” & “e”

§ Different brands are at different stages

§ Already payroll software typically then has a process of accumulating the PAYGW and also calculating the SGC obligations for reporting at any time but definitely for inclusion in the Monthly or Quarterly Activity Statement process. Software has typically already removed the “double handling”

8. Monthly or Quarterly Activity Statement a. Review process (varies on extent but tends to be in conjunction with SGC verification)

g.

b. Declare accumulated gross pay h.

c. Declare accumulated PAYGW i.

d. Verification and authorisation to lodge complete Activity Statement j.

§ The preparation of the Activity Statement exists in different software through a variety of different methods. In a true STP world we look for “a”, “b” & “c” to be a set of procedures that enable review and then generation of a set of reports provided to the “authorised person” in the business to then authorise the lodgement of the Activity Statement.

§ Different brands are at different stages.

e. Lodge Activity Statement k.

§ The SBR enabled lodgement of Activity Statements from within the business’ own software as a ST concept appears to be nearby but is not implemented across the board and we are unaware of a truly integrated STP type activity statement lodgement

§ Some practice management software exists to receive transmissions from “payroll” software to then facilitate the lodgement

§ Noting that many Activity Statements contain other compliance obligations outside of Payroll

f. Payment as part of Activity Statement debt l.

§ A STP concept would be that as soon as the Activity Statement can be lodged that lodgement is facilitated and then at the same time the ST concept would have the software scheduling the payment of the Activity Statement debt on the day due for payment. Therefore, no further engagement with the process as it has already been calculated, reviewed, verified, authorised, lodged and it is now scheduled for payment.


9. Quarterly SGC Obligations a. Review process (tends to be scrutinised to ensure obligations are known) m.

b. Utilise software SuperStream capabilities to n.

i. Send required messaging ii. Send payment to Clearing house with instructions

10. Pre-End of Year

a. May or June SGC review to enable employer to make tax deductible contributions o.

§ Similar process to item 9. Implemented differently by different brands

11. End of Year

a. Total reconciliation and payroll review p.

b. Preparation of Payment Summaries for employees q.

i. RESC amounts to be determined

ii. RFB amounts to be determined

§ Different processes in different software – continual improvement required

§ In STP this will be preparation for “Finalisation” of data

c. Lodgement of Payment Summaries with the ATO r.

§ Similar comment as for activity statements noting that there are distinct differences between brands “the SBR enabled lodgement …. from within the businesses own software as a ST concept appears to be nearby but is not implemented across the board”

§ In STP this will be replaced by the “Finalisation” process. Same outcome but different submission. d. This tends to be the time to facilitate any corrections to SG as the payroll has been more intensely reviewed

s.

e. This tends to be the time to reconcile PAYGW amounts to final year’s payroll figures enabling final Activity Statement adjustment

t.

12. Cessation of Employment

a. Termination pay (often subject to later correction due to incorrect application of tax). u.

b. Notice of separation v.


Legislation https://www.legislation.gov.au/Details/C2016A00055

The Budget Savings (Omnibus) Bill 2016 – Single Touch Payroll received Royal Assent on Friday 16 September 2016.

ATO Guidance This information is to provide the explanation of how the ATO will be implementing STP. It will provide its application of the law and its administration of how STP will affect each employer and the ATO. Topics will include:

§ Compliance program § Exemptions § Thresholds

https://www.ato.gov.au/About-ATO/About-us/In-detail/Strategic-direction/Simpler-reporting-with-Single-Touch-Payroll/ Who needs to report Explanatory Memorandum explains:

Subject to specific exemptions, entities with 20 or more employees (substantial employers) on 1 April 2018 will be required to report under STP from 1 July 2018. Entities that become substantial employers on 1 April in a subsequent year will be required to report under STP from 1 July of that calendar year. [Schedule 23, item 1, subsections 389-5(6) and 389-5(1) and sub item 22(1)]

For the purposes of determining whether an entity is a substantial employer, the number of employees is calculated using a headcount rather than a full-time equivalency. The term ‘employee’ has its ordinary meaning which means that contractors will not be included in the relevant headcount. [Schedule 23, item 1, subsection 389-5(6)]

If you have 20 or more employees as of 1 April, then you must commence STP from the next 1 July. Wholly owned groups are aggregated for the purpose of this headcount. Exemptions may be granted where the 1 April headcount results in an unfair impact on an employer.

The Detail


Technical – What the Software Must do for You

Every pay run, the software must create a PayEvent submission to be sent to the ATO (using ebMS3.0/AS4 (digital message exchange technology), either directly from payroll software or via an intermediary through a gateway, (Business Transaction Network), to the ATO.

The PayEvent submission will be the YTD values of any employee paid in that PayEvent. An employer may have many PayEvents per day or only one per a normal pay cycle (e.g. fortnight). The concept allows out of cycle payments.

The PayEvent submission will also include the total amount of gross wage for that PayEvent only and the amount of PAYGW for that PayEvent only for the employer. This is to allow the prefill of the Activity Statement W1 and W2 amounts.

Every payment of Super, the Payment Contribution message will also be sent to the ATO (currently sent to SuperStream)

At the end of the year, provide a method of including RESC and RFB amounts and then submitting the “Finalisation” set of data for all employees (replacing the EMPDUPE process) to the ATO. They must provide a process for amending the “Finalisation” message.

The software must facilitate an easy method of enabling corrections to payroll that is then reported in alignment with the ATO corrections framework, yet to be determined.

Registering for STP For the “Retail” onboarding process (refer below) the employer would have to register to receive the information which will have to include where myGov notifications are to be sent for the employer and also establish the authorised secure connection between their software and Government to receive the information.

For the “Wholesale” onboarding process (also below) and for the submission of PayEvent and “Finalisation” messages, the employer’s software will also have to be authorised to interact with Government. The existing cloud authentication and authorisation processes, which require software to use a device AUSkey (of the software company) and the software provides a Unique Software ID between the software company and each Business Management System (the businesses software), will facilitate this link.

Your software must have a Unique Software ID that identifies each payroll software system that you use to submit STP information. Some employers have different pay locations running different payroll software but for the same employer, i.e., the same ABN. The two or more different payroll systems will use the same ABN but have different Unique Software IDs which allows the ATO to recognise and accumulate the different systems submissions. If an employee works for multiple locations and is paid by different payroll systems, then that employee will have two different sets of YTD numbers provided through STP to their myGov profile and the ATO will provide two or more different payment summaries being one for each pay location (Unique Software ID).

Software should also facilitate appropriate authorisation processes. These same processes should be in place for management to authorise the payment of staff, following the calculation of the payroll. This authorisation process will now verify that the same data should be submitted to the ATO.


Future § The concept of a having a “payroll finalised” button is consistent with the next advancement

of software. A button that: o Finalises the calculation of the payroll o Finalises the calculation and recognition of the SGC amounts o Finalises the calculation and recognition of PAYGW amount o Obtains the “authorised person’s” sign off to complete and process the payroll o Makes payment to all employees o Sends pay slips to all employees o Schedules the payment of the PAYGW amount for the (future) date required

- The reporting and the payment can be scheduled for different times o Schedules the payment of the SG amounts and sending of the data through the

selected clearing and messaging house for the (future) date required - The reporting and the payment can be scheduled for different times

Technical – What the Government Must Deliver In order for STP to be successfully implemented there is a significant technology and process implementation required by Government. These include:

§ The ATO computer able to receive STP submissions all day everyday o Alternatively, a queuing system for receiving information

§ myGov being able to provide Payment Summaries § ATO providing Payment Summaries when the employee doesn’t have myGov § myGov being able to provide the onboarding interface for employees § myGov being able to interact with employers with the onboarding information § myGov providing a notification system for employees and employers § ATO providing a new process for the BAS, especially if they are prefilling W1 and W2 § ATO process of the data received § A different ATO approach to compliance activities


STP Processes A: Onboarding / Commencement of a new employee Currently an employer undertakes a number of induction and information gathering steps for a new employee:

1. Providing Information about the employer 2. Obtaining Information about the employee, (required for payroll purposes including bank

account details, address etc.) 3. TFN Declaration provided for completion 4. SuperChoice form provided for completion 5. National Employment Standards notice 6. Fair Work requirements

It is envisaged that eventually under STP items #3 TFN Declaration and #4 SuperChoice are replaced by providing in an employee induction pack explanation to the employee on how to provide this information through Digital interactions. The STP “Commencement” or “Onboarding” is an enhanced and automated process for an employer to receive the information for a new employee:

§ By enabling a digital interaction between the government records and the employer, the employer will (allegedly) receive better information for a new employee.

§ One version is a myGov initiated process for the employee to digitally send TFN Dec and SuperChoice information to the employer. (“Retail”)

§ The second version is that Payroll software will be able to interact with the Government systems to verify the information provided by the employee through systems like payroll employee portals. (“Wholesale”)

STP only deals with the aspects currently achieved through the TFN Dec and SuperChoice forms. STP does not deal with or affect any aspect of an employer’s Fair Work obligations including the provision of the NES document, the determination and advice as to terms of employment and the application of Modern Awards. “Retail” The term retail is being used to describe a service being provided by the government to an employee through myGov. It facilitates the employee authorising the provision of (verified) information by government to the employer. It relies on the ability for the employer to then receive that information. The process would be:

§ Employer provides notice to employee of which ABN relates to their new employer (part of the induction pack)

§ Employee logs into myGov and o selects “started a new job” or similar o enters the employer’s ABN and confirms the employer’s name o reviews their personal information and TFN Dec information o reviews their list of superfunds and nominates which one the employer is to use o authorises myGov to send this information to the employer

This system will only work if either:

1. The employer’s payroll software is able to receive myGov transmission of this information, or


2. The government will provide the information to the employer in an alternate form The employer would (assuming their software has the facility)

§ Have registered their ability to receive myGov submissions § Receive a notification from myGov that an employee has sent information for them § Upload the information into their payroll software

The technical specifications and actual operations of this service are yet to be seen and therefore we are providing our best guess as to the envisaged system. We appreciate the concern that many bookkeepers and employers have expressed that the information provided will be incorrect or require correction. “Wholesale” Wholesale is a system whereby the employer’s payroll software will collect the information from the employee and then seek to verify and then submit the information to government. We are used to a system where the employer obtains all necessary information from a new employee on paper forms (the TFN Dec), which is then submitted to government either by mailing the paper form, or more recently directly through software. Increasingly software enables the collection of all necessary information via an employee portal (computer interaction). The employee can now provide all information including TFN Dec and SuperChoice forms on line and then (hopefully) the software also obtains the necessary declarations and digital signatures to authorise the use and lodgement of the TFN Dec and also the use of the SuperChoice information as nominate. In the envisaged STP program, the software will continue to obtain this information from the employee and the employer’s software will then interact with government systems to verify the TFN Dec information including government debt, visa working conditions, tax thresholds and categories. If the government information is different to the employee provided information, then this system will allow for the government records to be updated or seek verification and correction by the employee. SuperChoice elections will also be automated with the employer’s software notifying government of the election the employee has made and verifying that fund is known in the government records or add the fund to the employee’s profile. In either scenario, the employer must have a system that:

§ Knows they have a new employee to set up § Advises the employee how to and where to send their TFN data (this is a replacement to

providing them with a TFN Dec form today) § The software then needs to know to expect the data to be received and presumably report

or flag it has been received or hasn’t been received (same) § The system (or software) then needs to determine whether that information received is valid

(same process as today) § The system then needs to establish the payroll parameters in the software to pay and tax

the person appropriately (same) § Must still comply with record keeping obligations

Possible automation opportunities:

1. If the employer’s software has an automated system to track that it is expecting a transmission of TFN Dec data and then it could report those still outstanding etc.


2. The myGov system could send a notification to an employer that the information is ready to be collected.

3. The employer must be able to send back to the government the correction to information that has been provided.

When? The current model indicates that the software will be able to submit the new employee information to Government at the first time they are paying the employee, i.e., in conjunction with the employee’s first PayEvent. We are unsure why it is being combined with a PayEvent and believe that many employers will conduct an onboarding process and complete all the entry into the software and then authorise for that information to be sent to the Government. As such business (software) should allow that process. If the information is not being sent until the first pay run, then the business should not be concerned. We have expressed that at no time can the STP system of onboarding prevent an employee being paid. Technical Data Every withholder must be registered for PAYG Withholding with their ABN; some employers have a WPN (Withholder Payer Number). Your software will deal with the conversion of your new employee information into the required taxonomy and in the required data form for submission and interaction with the Government. The data that is being sent, verified, interchanged is the same information that existing laws require you to have when you engage with an employee. Cessation of employment The ATO STP proposal is that when a person’s employment ceases then at the push of the termination button information is submitted to the relevant government agencies.


B: PayEvent The ATO STP proposal is that on the instance of each and every pay run (weekly, fortnightly, monthly etc.) when the “button” is pushed to finalise the pays, send the payslips, authorise and arrange the payment to the employees, that same button will transmit details of that pay run to the ATO. This would need to be implemented by each software company but the ATO system must be able to receive the data.

By enabling and requiring the perpetual reporting of payroll information by an employer to the government, there is an expectation that the following will be achieved:

§ Employers will use software (better business process) § Employers will report PayEvent information every time they pay someone. An employer

must by law provide a payslip to the employee, some of that information will now be provided to the government at the same time.

§ Employers must already comply with the SuperStream system which provides a reporting of the amount of super paid to the funds, now that information will also be provided to Government.

§ Government will therefore see the accruing of PAYGW from an employee’s pay and be able to offset that against the amount paid by that employer, enhancing visibility of the payment and compliance of the employer.

§ Government will see the accruing of the Superannuation Guarantee Contribution amounts at each PayEvent and be able to match that to the amounts of SG paid to the funds by that employer for each employee, enhancing the visibility of super payments and therefore increasing the Government’s ability to follow up employers who are not meeting their obligations.

The ATO will use that information to monitor the employer’s PAYGW pattern and also payment. The ATO will allow payment of SGC and PAYGW at the time of paying the employee. Note this is voluntary.


The ATO concept is that the ATO will prefill PAYGW information on Activity Statements. The Legislation also provides that an employer who is in STP will NOT be required to provide payment summaries to the employees as each employee can obtain their payment summary from their myGov profile. The concept is also that the employee will be able to obtain their payroll information continually from the myGov site including Wage and Super amounts. The ATO will also monitor and provide information about each employees Super Contributions and the annual cap. The process would be:

§ Employer performs payroll as they always have § Employer sends payslips and payment instructions and now the STP message each time

they pay someone WhatDataisBeingSent?Each pay cycle, (weekly, fortnightly, half month, month, occasional, out of cycle), the file will include: Payment Details

§ Period start date § Period end date § Financial year start date § Financial year end date § Final Indicator – used before 14th July each year to indicate information is final (this is not

correctly placed or described in ATO documents at this time) § Payee record count – the number of employees being paid in this PayEvent § Payroll transaction ID – a unique identifier for each STP submission § Payment date § Total PAYGW for the employer for this PayEvent § Total gross payment for the employer for this PayEvent

Intermediary Details If there is an Agent acting on behalf or lodging on behalf of an employer their details must be submitted:

§ ABN § Registered Agent Number § Contact name and details § Name of person making the declaration § Declaration date § Declaration acceptance indicator

Employer’s (Payer’s) details

§ Employer’s identification details ABN or WPN § Employers name and contact details § BMS identification (optional - which pay system for the employer) § Name of the person making the declaration § Declaration date § Declaration acceptance indicator


Employee (Payee) details § Payroll ID § TFN § Contractor ABN (only used to allow VWH agreements) § Payee name, contact address, date of birth § Commencement date (the date they started with the employer – optional) § Cessation date (optional – used to end the relationship with the employer) § Phone and email (optional)

PayEvent details per employee

§ Gross salary and wages YTD value (normal, foreign employment, labour hire, VWH all separately reported)

§ Allowance amounts YTD values and details per type § Deduction amounts YTD values and details per type § PAYGW tax withheld YTD value § YTD amount of SGC accrued (or the YTD value of OTE) § RESC (an optional field and can be used to provide the value only once per year for

inclusion in the Final information for payment summaries) § ETP details (optional but all previous ETP information required if applicable) § RFBA (an optional field and can be used to provide the value only once per year for

inclusion in the Final information for payment summaries) § RFB Exempt Amounts (optional) § CDEP amounts


C: Annual Reporting The ATO will now provide the end of year payment summaries to the employee. This means the employer no longer needs to provide the payment summary physically (or electronically) to each employee. However, the employer will still need to verify their payroll records and then send a message to the ATO to state that the final end of year information provided is correct and able to be used. In effect, no more EMPDUPE files or group certificates, but these are replaced by a final set of PayEvent data. The ATO will then inform the employee that their information is final and ready to be used in a tax return. “Finalisation” replaces the previous submission of EMPDUPE files (copies of Payment Summaries) to the ATO. By sending a “Finalisation” STP submission you will be telling the ATO that the data they now have (as part of that finalisation submission) is to be considered final and can be entered in Income Tax Returns. Technically the “Finalisation” message will be similar to the PayEvent message and the current view is that it will be the same data set. Noting that it may or may not be in conjunction with an actual PayEvent. We envisage that operationally employers and their agents will continue to do what they do now which is do the final pay in their normal cycle and then commence a process of review, verification, correction of data to then submit the (previous EMPDUPE / payment summary) “Finalisation message” to the ATO. RESC and RFB reporting obligations continue and would be provided to the government as part of the “Finalisation” process. Amended Finalisation: you can resubmit a “Finalisation” data for an employee or all employees if an amendment is required after a “Finalisation event” What data is being sent? The current view is that an “update” service will be used to send a “Final” set of data to the ATO. The data will be the same as the PayEvent reported above.


D: Superannuation Payment Reporting Explanatory Memorandum explains:

These amendments require reporting entities to report superannuation contributions that reduce their SG charge percentage that, in turn, will reduce their liability to SG charge for a particular quarter.

As such, the Commissioner may also require the reporting of contributions that exceed the SG charge percentage. Including these contributions will allow the Commissioner to distinguish between an employer’s SG contributions and salary sacrifice amounts (if any), and take account of the fact that employer SG contributions made for one quarter may reduce the charge percentage in an earlier or later quarter. In some cases, reporting entities may also face increased compliance costs separating different contributions. [Schedule 23, item 1, item 3 in the table in subsection 389- 5(1) and subsections 389-5(2) and (3)]

Employers are already subject to a similar obligation to provide contribution information to superannuation funds. Under Part 4A of the Retirement Savings Account Act 1997 and Part 3B of the Superannuation Industry (Supervision) Act 1993 (‘the SuperStream regime’), employers are required to report superannuation contribution information to superannuation funds on the same day the employer makes the contribution to the fund. The information must be given in accordance with certain data and payment standards determined by the Commissioner.

Employers may already use SuperStream-compliant software packages, clearing houses or intermediaries to produce contribution transaction reports. In order to align these STP reporting obligations with an employer’s existing processes under the SuperStream regime, the Commissioner envisages that the information contained in contribution transaction reports would satisfy the employer’s obligations under STP. Whilst, this may involve an employer providing the Commissioner with more information than is required, an employer may wish to report in this way to minimise their compliance costs.

By requiring employers to report such information to the Commissioner on or before the day the contribution is made, the Commissioner will have more timely access to employee-level contribution information than under current arrangements.


You may elect to start being an “STP Employer” at any time after the ATO is ready to receive your information. The ATO must be ready to do the following:

§ Receive STP PayEvent submissions § Receive new employee commencement submissions § Provide payroll information onto an employee’s myGov profile § Provide notification systems to the employee following an end of year finalisation of their

information so they are aware their payment summary is available from myGov § Provide Payment Summaries to the employee via myGov § Provide Payment Summaries to the employee who does not have or is unable to use

myGov In theory, the ATO will be able to do this on 1 July 2017 and therefore you could elect in as of this date. In order for you to do this your software must be ready to do the following:

§ Send STP PayEvent submissions § Send new employee submissions § By 30 June 2018 be able to enter all end of year information and submit the STP

“Finalisation” message You may commence using STP at any time during a payroll year. If you do commence STP, your payroll must submit the YTD payroll information, including the period prior to you entering STP. Therefore, you will not be required to provide payment summaries. You do not have to wait to the start of a new payroll year! If you are setting up payroll for the first time in software and then using that software to enter STP then ensure that the YTD values are being sent to the ATO. If you are swapping software then you have alternate strategies:

1. Ensure that your new payroll software uses the same BMS Unique Software ID as your old software and therefore only produce one set of YTD numbers for each employee

2. Use a different BMS Unique Software ID and therefore you will send two different finalisation messages to the ATO and the employee will receive two different payment summaries from the ATO. One for each software. The old software will have its YTD value until it is no longer used and will need to be finalised. The new software will accumulate YTD only from the date it commenced as the payroll software.

3. Zero out the old YTD number in the old software and bring in the YTD numbers into the new software.

When to Start with STP


Your Reconciliation Processes Don’t Change! The employers records are the source of truth and the PayEvent information submitted to the ATO can be updated at the next submission. However, note that this does not mean a material understatement of PAYGW (or SGC) from a prior period can be just updated in the next STP submission. If you need to increase the amount of PAYGW that has been withheld from a previous PayEvent and that amount should have been reported and paid on a previous activity statement (or for large employers simply have been paid earlier). The same rules apply for disclosure and correction of the previous Activity Statements and payment. Interest will apply from the original due date until the date of payment. The ATO’s records for the employer will be fixed because you will amend your BAS or payment information as you would normally have done. However, in terms of your STP submissions: That error that occurred in a previous STP PayEvent submission has now been fixed in your payroll software and when you make your next STP PayEvent submission, (or possibly not until the “Finalisation message”), the ATO YTD values for the employee will be fixed at that time. Refer ICB resources on how to correct a previous activity statement or a previous large employer payment Note each PayEvent reporting will have YTD values for the employees being paid in that PayEvent and the amounts for the period for the employer. These do NOT have to be reconciled to the ATO systems. That is, you do not have to amend a previous YTD submission and you do not have to amend any period value submission as part of the STP submission process. Why? Because the YTD figures will be fixed with the next PayEvent and the employer figures with the amended BAS. A reconciliation must be performed by the employer at each BAS lodgement for each period to that each BAS reports the correct PAYGW and gross wage for the employer for the period. Similarly, the end of year process would have a reconciliation of the employer’s source of truth and the amount reported on each BAS, (or paid in the case of large employers). Note that the employer’s system is to be the source of truth so that the YTD at employee level is the constantly corrected amount. The employer period values for each PayEvent provides the ATO with the data to add up and prefill the BAS. However, if there has been a change, the employer’s records are the source of truth and therefore the employer would correct the prefill values provided by the ATO.

Reconciliation and Corrections Reconciliation and Corrections


9th January 2017 Policy and Law

§ The employer’s records are the source of truth. § Reconciliation of the employer’s records to the ATO copy of data is not required. § Fair Work obligates an employer to issue correct payslips at the PayEvent. § ATO obligates correct Activity Statements, (or payment information for large employers).

Executive Summary: Recommendation - Corrections The employer’s level of information, (total gross wages and tax withheld for each period), that has been submitted at the time of making each PayEvent report, will need to be correct on the submission of an Activity Statement, (or payment for large employers), and this is taken as the employer submission of a “statement” to the commissioner. Any update to employer level information remains in accordance with existing Activity Statement / payment amendment requirements. The employee specific information (YTD values) will be updated at the next PayEvent or at finalisation. Alternative consideration is a requirement to use the “update” service to amend the employee information being displayed on myGov but only in accordance with Activity Statement lodgement timeframes. This “update” requirement should only apply after the first year of STP. For consideration Should an employer have to correct the employee specific information provided to the ATO at least each quarter? (which would only be required if there was no other PayEvent to correct the information). Should the correction only be on employee request? Legislation The Explanatory Memorandum explains

The framework also utilises the approved form provisions (refer section 388-50), in much the same way as they are used for existing PAYG withholding reporting obligations. The use of the approved form provisions provides the Commissioner with flexibility to defer due dates to better align reporting with an employer’s payroll processes. However, the legislation also limits the flexibility provided by the approved form provisions to specific reportable content. Ordinarily, the approved form provisions would allow the Commissioner to specify the content of a report whereas these amendments limit the content that the Commissioner can require in relation to specific amounts. This is designed to provide reporting entities and payroll system designers a high level of certainty and stability about the amounts to be reported under STP.

ICB Submission Reconciliation & Correction


Background - Process in STP The employer will submit to the ATO as part of STP

§ The YTD values of payroll information for each employee paid in a PayEvent § The Period amounts of Gross Wage and Tax Withheld for each PayEvent, and § Notification of the “Final” status of an employee’s information for each financial year.

The ATO will § Display the most recent YTD values for each employee in the employee’s personal myGov

Profile (with the date those values were submitted), § Aggregate each of the employer level period amounts (for each PayEvent) submitted and

attributable to each Activity Statement period to prefill the employers W1 and W2 values, § Provide the employee with the Payment Summary as a result of the “Final” information

notification, and § Conduct and enquiry or compliance program based on the information

Scenario A: Correction before BAS If an employer changes an amount previously reported in a PayEvent within the same Activity Statement period before the Activity Statement has been submitted. The employee’s YTD values will be updated in the ATO information in one of:

§ The next PayEvent for the employee will provide the updated YTD values § The “Finalisation message” will provide the correct final YTD values for the employee (this

may occur as part of the end of year process or if the employee has not been included in a PayEvent since the change)

§ The employer may choose to submit an “update” event message to alter the current values for the employee, or

§ The law and taxonomy allows for a Full File Replacement (FFR) which may also be used to affect the change.

In this instance the employee’s YTD values will be updated. This should be considered acceptable and no further action or consequence should apply. This update can happen at any time including up to the point of finalisation Alternatively, it may be considered that the employer should use an “update” event to correct a specific employee’s record at least once a quarter or maybe only at employee request if there has not been a PayEvent to affect the correction. We note this would be an increased obligation (an extra step) in needing to report to the ATO, however we also note that the employer already has an obligation to provide accurate information to the employee, therefore any correction should already have been performed in the system and notified to the employee. Accordingly, the notification of the corrected values to the ATO through the “update” event appears feasible with minimal impact. The period values for the employer are unlikely to have been updated as the change is not reported within a future normal PayEvent. We submit that this is acceptable. The correction will occur as the employer must alter the prefill Activity Statement values to be the correct reporting of W1 and W2 for the respective period It is the Activity Statement that should continue to be considered the “making of a statement” to the Commissioner. As no Activity Statement has been submitted for this period there is no need to amend an activity statement. The same rules would apply to that activity statement as under current requirements.


Large Employers For a large employer who has a weekly payment obligation for the amount of PAYGW the consequence of an increase to an amount of PAYGW is more likely to require amendment to a previously reported or paid amount of PAYGW. We propose the same regime would apply in an STP world as it did previously in terms of the employers PAYGW amounts. Same interest regime, same amended reporting regime. Scenario B: Correction after BAS lodged If an employer changes an amount previously reported in a PayEvent after the Activity Statement for the relevant period has been submitted. The employee’s YTD information will be updated in:

§ The next PayEvent § The “Finalisation message” § A “update” message or § Full File Replacement (FFR)

This is acceptable and no further action or consequence should apply. This update can happen at any time including up to the point of finalisation. The employer’s reporting of W1 and W2 for this past period has been submitted in the lodgement of the Activity Statement. The employer must now alter the activity statement for the relevant period including paying any additional amount and noting the likely imposition of interest and possibly penalties. This is the same regime as currently in relation to activity statement amendments. STP report and “False or Misleading Statements” It has been the stated intention to allow the STP report of the YTD values to be corrected at the next PayEvent. Therefore, the Commissioner will need to state that the “grace period” (as required in the Act) for correcting a previous STP report of YTD value for an employee is in accordance with the above comments:

§ The next PayEvent § The “finalisation message” § An “update” message, or § As part of a full file replacement

We restate that the employer amounts of Gross Wages and Tax Withheld for each reporting period (Activity Statements for Small and Medium withholders) and weekly payment advice (for large withholders) will be corrected and be subject to the same amendment requirements as the existing Activity Statement and payment advice notifications. No part of this paper permits or is intended to create an opening for the employer to provide false or misleading statements to the commissioner as a STP PayEvent or any other STP obligation. All employers should be permitted to make corrections to payroll in accordance with this paper however all existing obligations of an employer in relation to payroll and correct timing of withholding PAYGW and accruing of SG apply.


“Update” message Should be the same taxonomy as a PayEvent message and it updates all values for the employee but it does not have any consequence for the employer’s values. When does an employer need to be correct? Fair Work sets the requirements for provision of payslips to the employee, noting there is currently no requirement to display YTD information. The pay slip provides the period’s payment information. A requirement is also to retain the details of what has been paid when, i.e., each pay slip’s details; accordingly, the YTD information can then be determined for the employer to meet their payment summary obligation. It is logical that a pay slip should be correct. It is logical that if a pay slip is incorrect that the employer should correct that pay slip. It is an ATO requirement to withhold the correct amount of tax from payments made to employees and accrue and then pay the correct amount of SG. Therefore, currently the employer must issue pay slips and correct those pay slips when an issue is brought to their attention and withhold PAYGW and if any alteration effects that PAYGW amount they must alter the withheld amount and report/pay that alteration in accordance with Activity Statement requirements. In an STP environment, despite the employer reporting a PayEvent to the ATO which may now not be correct, we propose that this should not necessarily increase the reporting requirement of the employer ATO, i.e., no additional step that creates an encumbrance. Therefore, we propose that in an STP environment the employer must:

§ Continue to correct their own employer records for payroll § Correct any pay slips (in accordance with Fair Work) and provide them to the employee § Correct any activity statement reporting in accordance with the current framework § Correct the employee specific information by the time of “Finalisation”

We note that software may make this issue redundant by performing an automated “update” service following any alteration. Refer below comment to Software Companies. If the alternative consideration (requiring an “update” to corrected amounts at least once per Activity Statement reporting period) is implemented, we strongly recommend this is not brought in until after 20 June 2019, (i.e. one year following the implementation of STP). Timing of corrections – what is corrected when? If it becomes an expectation, or the behaviour of the employer is, to lodge an “update” following any correction to a past PayEvent, then we note that the update will be to the current values of YTD information. Therefore, the update may not be noted in STP reports within the relevant activity statement period. Typically for a quarterly activity statement reported if payroll is reviewed and a correc

ICB Definitive Guide to Single Touch Payroll - FINAL · ICB Definitive Guide to Single Touch...

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