Single Touch Payroll – Changes ahead

Just when you thought you had all your systems bedded down for Single Touch Payroll (STP), the government is expanding the information on employee payments you need to provide.

So, what will the changes mean for your small business?

STP reporting to expand

Under the current STP rules, employers are required to report payroll information to the ATO each time they pay an employee salary or wages, pay-as-you-go (PAYG) withholding or superannuation.

In the 2019-20 Federal Budget, the government announced an expansion of the data it collected through the STP system starting from 1 January 2022.

The change is called STP Phase 2 and under the new rules, employers will be required to report additional information on or before each pay day.

According to the government, the aim of STP Phase 2 is to “reduce the reporting burden for employers who need to report information about their employees to multiple government agencies”.

The additional data collected from 1 January 2022 will also be used in the administration of the social security system.

New STP Phase 2 requirements

The key changes in your reporting include providing extra information on the employment basis for each of your employees (full-time, part-time or casual).

You will also need to provide information on the tax treatment of their salary. This is to help the ATO identify the factors influencing how you calculated your employee’s PAYG withholding. For instance, where your employee has notified you that they have a Study Training Support Loan.

When an employee ceases employment, you will now need to provide information on the reason, for example, voluntary separation, redundancy or due to illness. This will remove the need for you to provide former employees with separation certificates.

Phase 2 also gives you the option to include child support garnishees and child support deductions in your STP report, reducing the requirement to provide a separate remittance advice report to the Child Support Registrar.

More detailed information

Reporting of income types and country codes is also being introduced with STP Phase 2 to help the ATO identify employee payments with specific tax consequences. The government believes this will allow your employees to complete their personal tax returns more easily.

A significant change with Phase 2 will be the new requirement to separately itemise the components of any gross payment amounts such as bonuses and commissions, directors’ fees, paid leave, salary sacrifice, overtime and allowances.

Allowances will need to be reported separately, not just expense allowances that may be deductible for your employees. Any lump sum payments you make to employees need to be reported under new labels.

Although you need to provide additional information in your STP reports, the way you submit the report, due dates and types of payments covered in your reports will stay the same. Your tax and super obligations and the requirements for end of year finalisation will also stay the same.

Benefits from the STP expansion

The government claims employers will receive a number of benefits from the introduction of STP Phase 2.

A key one is a reduction in the duplicate information you are required to provide to different government agencies, reducing unnecessary interactions with these departments.

You will also no longer be required to send tax file number (TFN) and withholding declaration information to the ATO, as this will be captured in the employment conditions section of your STP report.

By more clearly defining the components making up an employee’s gross income, the government says it will be easier for employers to understand their various obligations.

Assistance with new reporting requirements

The government is working closely with digital service providers to ensure they update their software, so it is ready to commence collecting the additional information from 1 January 2022.

The specific information your business needs to provide for STP Phase 2 depends on the particular software product you use, and how you manage your payroll.

Contact us on 03 5120 1400 if you would like more information or help transitioning your business to the new STP requirements.

Material contained in this publication is a summary only and is based on information believed to be reliable and received from sources within the market. It is not the intention of RGM Financial Planners Pty Ltd ABN 36 419 582 Australian Financial Services Licence Number 229471, RGM Accountants & Advisors Pty Ltd ABN 69 528 723 510 that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. No representation is given, warranty made or responsibility taken as to the accuracy, timeliness or completeness of any information or recommendation contained in this publication and RGM and its related bodies corporate will not be liable to the reader in contract or tort (including for negligence) or otherwise for any loss or damage arising as a result of the reader relying on any such information or recommendation (except in so far as any statutory liability cannot be excluded).

Liability limited by a scheme approved under Professional Standards Legislation.


Tax Alert June 2021

The Government is continuing to support COVID-affected businesses by extending most of its pandemic inspired tax offsets and benefits. But at the same time the ATO has micro businesses like contractors who fail to declare all their income in its sights.

Here’s a roundup of some of the key developments when it comes to tax.

LMITO extended again

For individual taxpayers, an important tax change is the Budget announcement of another one-year extension to the current low- and middle-income tax offset (LMITO) for 2021-22.

This welcome decision will provide a valuable tax offset of up to $1,080 for individuals and $2,160 for dual income families as taxpayers repair their post pandemic finances.

Continuation of full expensing and loss carry-back

Business taxpayers should also be happy with the Budget announcement of an extension to the full expensing and loss carry-back measures. Under the full expensing rules, eligible businesses with an aggregate annual turnover of up to $5 billion are able to deduct the full cost of eligible depreciable assets until 30 June 2023.

Eligible companies can also carry-back tax losses from the 2022-23 income year to offset previously taxed profits as far back as 2018-19. This tax refund is available when you lodge your business tax return for the 2020-21, 2021-22 and 2022-23 financial years.

ATO tracks contractor payments

While the Budget provided tax incentives, contractors working in courier, cleaning, building and construction, road freight, IT, security and surveillance industries are increasingly under the tax man’s spotlight.

The ATO has announced it’s now combining data from its Taxable Payments Reporting System (TPRS) with its other data and analytical tools to ensure more than $172 billion in payments to contracting businesses have been properly declared. The ATO is now proactively contacting contractors identified as not declaring income reported by their customers through the TPRS.

New food and drink limits

The new reasonable weekly food and drink amounts businesses can pay an employee as a living-away-from-home allowance (LAFHA) have been released.

For this FBT year (starting 1 April 2021), the ATO considers it reasonable to pay an adult working in Australia a total food and drink expense of $283 per week. As an employer, if you pay more than this you will be liable for FBT on the LAFHA over this amount.

New tax umpire

Small businesses will now have more rights to pause or modify the collection of tax debts under dispute with the ATO.

The Budget included an announcement that small businesses will be able to apply to the Small Business Taxation Division of the Administrative Appeals Tribunal to have an ATO debt recovery action paused until their case is decided.


End to STP exemption

From 1 July 2021, the exemption for small employers on reporting closely held payees through the Single Touch Payroll (STP) system will end.

This exemption allowed small employers to not report payee information for any individuals directly related to the business. Closely held payees include family members of a family business, directors or shareholders of a company, or beneficiaries of a trust.

More support brewing

The Budget also recognised the importance of small business entrepreneurs and technology-driven innovators, with incentives to spur economic growth.

Brewery and distillation businesses will also benefit from a new measure giving them full remission (up from 60 per cent) of any excise paid on alcohol produced up to a new $350,000 cap on the Excise Refund Scheme from 1 July 2021.

The Budget also recognised the growth in local digital gaming businesses, with a new Digital Games Tax Offset. From 1 July 2022, eligible game developers will be able to access a 30 per cent refundable tax offset for qualifying Australian games expenditure of up to $20 million a year.

The Government also plans to provide tax incentives for medical and biotechnology companies by introducing a new ‘patent box’ from 1 July 2022. Income from patents will be taxed at 17 per cent, rather than the normal 30 per cent corporate rate.

Material contained in this publication is a summary only and is based on information believed to be reliable and received from sources within the market. It is not the intention of RGM Financial Planners Pty Ltd ABN 36 419 582 Australian Financial Services Licence Number 229471, RGM Accountants & Advisors Pty Ltd ABN 69 528 723 510 or RGM Finance Brokers Pty Ltd ABN 81 330 778 236 (RGM) that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. No representation is given, warranty made or responsibility taken as to the accuracy, timeliness or completeness of any information or recommendation contained in this publication and RGM and its related bodies corporate will not be liable to the reader in contract or tort (including for negligence) or otherwise for any loss or damage arising as a result of the reader relying on any such information or recommendation (except in so far as any statutory liability cannot be excluded).

Liability limited by a scheme approved under Professional Standards Legislation.

Tax Alert December 2019

If the introduction of Single Touch Payroll (STP) wasn’t a big enough challenge, small businesses can now look forward to the arrival of e invoicing and changes to the Superannuation Guarantee (SG) rules.

Here’s a roundup of some of the latest tax developments.

E-invoicing to be rolled out

Small businesses can look forward to increasing use of “e-invoicing” following the ATO’s appointment as the local Peppol Authority. Currently being used in 34 countries, the Peppol framework provides a standardised e invoice for both domestic and international trade.

With e-invoicing, invoices are directly exchanged between the supplier’s and the buyer’s accounting systems – even if they use different software.

According to the ATO, by adopting e-invoicing businesses of all sizes can expect to see improved cashflow and quicker payments, easier processing and cost savings, fewer errors and reduced risk of compromised invoices.

The ATO will now work with digital service providers to deliver a range of e invoicing products for local businesses.

Inactive ABNs will be cancelled

Inactive Australian Business Numbers (ABNs) are an increasing area of interest for the ATO. If the tax man believes your business is no longer carrying on an enterprise, you face the risk it could decide to cancel your ABN.

To determine if an ABN is still being used, the ATO is checking the ABN holder’s tax return, whether their compliance and lodgement documents are up-to-date and a range of third party information.

If your ABN is mistakenly cancelled, you can reapply for the same ABN if your business structure remains the same. But if the structure is different – such as a sole trader now operating as a company – you will receive a different ABN.

Rule change for salary sacrifice and SG

Legislation to prevent employers from using employee salary sacrificed amounts to reduce their minimum Superannuation Guarantee (SG) payments has passed Parliament and will apply from 1 July 2020.

The new rules mean an employer can no longer count the amount salary sacrificed by an employee as part of the amount the employer is required to pay in SG contributions.

Also, the base amount on which SG contributions are calculated can no longer be reduced by any salary sacrificed amounts.

Limiting deductions for vacant land

Tax deductions for losses or outgoings (such as interest costs) incurred when holding vacant land not genuinely being used to earn assessable income have been reduced under new legislation.

The changes limit the claimable deductions for holding vacant land on or after 1 July 2019 – even if the land was held prior to that date.

Tax deductions are not affected if the land is held by a corporate tax entity, used for carrying on a business, used for primary product and leased, or where exceptional circumstances have affected a permanent structure on the land.

ATO tip-offs on the rise

Small businesses in the cafe and restaurant industry are “more likely” to be subject to a tip-off and subsequent investigation by a specialist team, according to the ATO’s Tax Integrity Centre (TIC).

There are also high volumes of tip-offs about black economy behaviour in the hairdressing and beauty, building and construction, and cleaning industries.

The TIC is receiving 230 tip-offs a day about black economy activities by small businesses such as undeclared income, paying workers cash in hand and not reporting sales.

Tax man focussing on SG compliance

With the tax man currently checking SG contribution payments for around “400,000” employers for the 2018-19 financial year, small businesses will need to stay on top of their obligations in this area.

The ATO is now “heavily focused on reducing the incidence of non payment of SG” courtesy of new Single Touch Payroll information, according to deputy commissioner, James O’Halloran.

With an “unprecedented level of “visibility” of super information at the account and transaction level”, the tax man plans to increase checks of SG payments and follow up employers not paying on time.

Material contained in this publication is a summary only and is based on information believed to be reliable and received from sources within the market. It is not the intention of RGM Financial Planners Pty Ltd ABN 36 419 582 Australian Financial Services Licence Number 229471, RGM Accountants & Advisors Pty Ltd ABN 69 528 723 510 or RGM Finance Brokers Pty Ltd ABN 81 330 778 236 (RGM) that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. No representation is given, warranty made or responsibility taken as to the accuracy, timeliness or completeness of any information or recommendation contained in this publication and RGM and its related bodies corporate will not be liable to the reader in contract or tort (including for negligence) or otherwise for any loss or damage arising as a result of the reader relying on any such information or recommendation (except in so far as any statutory liability cannot be excluded).

Liability limited by a scheme approved under Professional Standards Legislation.