STP reporting guidelines and exemptions
• The ATO requires all businesses to report a pay event during or prior to the set pay day. The pay day can either be the date that the employer plans to credit their employees’ salary into their respective bank accounts, or the date indicated in the electronic transaction of the business’s financial institution.
• Each STP report must include information on all employees’ withholding amount on that particular pay period.
• The report must include the date of the regular pay day period if the business includes out-of-cycle payments in their regular pay period. Employers must also report the year-to- date amounts of all relevant pay information of their employees for each pay run. This will include information such as gross wages and other allowances, PAYG withholding information and other deductions.
• Employers are also required to report all of their employees’ year-to-date ordinary time earnings (OTE) and employer super liability information for that particular pay period.
• The report must include PAYG withholding (BAS label W2) and gross salaries (BAS label W1) of all payments in that specific pay period. This information is expected to correspond with the amounts included in the business’s general ledger for that pay run.
• All pay runs must contain at least one employee record, with each record consisting of one record per employee and per pay ID. Employers must make sure that all of their employees have either an Australian Business Number (ABN) or a Tax File Number (TFN) included in their individual reports.
• If an employee is being paid more than once on a specific working day, the employer has the option to create an individual STP report for that particular employee. The report must include all relevant year-to-date information.
• Employers are allowed to file multiple pay runs within a single day. The STP system will generate an automatic timestamp that will identify the latest record for every employee. This will show up in the employee’s myGov account.
Once a business commences its STP reporting process, employers have to keep in mind that there are a set of minimum reporting requirements that aim to help them meet their STP obligations every time they send out a report to the ATO.
How to lodge an STP report based on business payroll structure
The ATO allows employers to lodge an STP report based on their current payroll structure. The pay event is required to be generated in either an ABN, a branch or a business management software identifier (BMS) ID level. The ATO allows various reporting schemes for these kinds of payroll structures:
• Multiple employee records
• Multiple ABN reporting
• PAYG withholding branches
• Multiple payroll solutions
PAYG withholding branches
Employers choosing to register PAYG withholding branches will need to pay and report separate PAYG withholding for every branch. For a business with multiple PAYG branches that are also registered separately, a separate STP report must be issued for each branch.
Multiple payroll solutions
Businesses using multiple payroll solutions are allowed to lodge separate STP reports from each payroll software. Each report will be identified via a unique BMS ID which can be found within the pay event file.
Out-of-cycle STP reporting
Out-of-cycle payments made by employers to their employees may need to be lodged via a separate out-of-cycle report. These payments may include bonuses, advance payments, back payments and commissions. These payments can be reported by using either of the following methods:
• Incorporating out-of-cycle payments into the next pay cycle
• Lodging a pay event on or before the regular pay day where the out-of-cycle payment was lodged
Businesses should know that out-of-cycle payments are different from ad hoc payments. Ad hoc payments are advance payments of regular salary payments and are usually reported within the period of regular salary calculations.
Multiple payroll solutions
Businesses using multiple payroll solutions are allowed to lodge separate STP reports from each payroll software. Each report will be identified via a unique BMS ID which can be found within the pay event file. While most payroll software providers issue employers with a BMS ID as part of their STP products, it is still best to ask payroll software providers regarding the BMS ID.
Multiple ABN reporting
An entity that will be submitting STP reports for all ABNs within a business group must have a business appointment on behalf of the employer which will then be lodged to the ATO. To secure a business appointment, an ABN must first be nominated on behalf of the business via the Cross entity authorisation form (NAT 73957) which can be found on the ATO website. The AUSkey administrator will then assign the designated role to the AUSkey holder.
When to report to the ATO
How frequently you report your payroll figures to the ATO will depend on how often you pay your employees. STP is designed to work with the business’ existing payroll cycles, so that if you pay weekly, you will also be reporting weekly; if you pay fortnightly or monthly, your reporting will also correspond with those timeframes. Special conditions will be given to microbusinesses (those with 1 to 4 employees), which are outlined below.
Exemptions from STP reporting
The ATO has outlined certain exemptions when it comes to businesses reporting via the Single Touch Payroll system, and the types of employees whose payroll records must be reported via STP. This includes exemptions for reporting certain payments, financial year exemptions and exceptions for reporting certain classes of employees. Businesses exempt from STP reporting for a certain financial year can apply for another exemption if they are not commencing their STP reporting immediately during the following financial year. However, employers will still have to comply with current PAYG withholding requirements.
Exemptions for closely held payees
Closely held payees – which are defined as a non-arm’s length employee, including family members within a family business, directors of a company as well as related shareholders and beneficiaries – will be given a one-year exemption from STP reporting. This was announced by ATO director Michael Karavas in early March 2019. The move was done in recognition of the fact that many family-owned and operated businesses, and microbusinesses, do not pay themselves and their family members at regular intervals. Longer term, the ATO has said it is planning to look at quarterly STP reporting obligations for these types of employees or benefactors, but to align this approach with the existing concession for the PAYG withholding payment summary annual report.
Exemptions for poor or no internet connectivity
Exemptions for businesses with seasonal workers
Businesses that employ seasonal workers may be eligible for STP reporting exemptions during the 2018-19 financial year, provided that they satisfy the following conditions: The business is expected to have less than 20 employees at 10-12 consecutive months within a given financial year The business has had less than 20 employees at a given period for 10-12 consecutive months within a given financial year
If a business is a member of a wholly owned group, then the business will only be eligible for the exemption if the entire group satisfies the conditions stated above.
Exemptions for insolvency practitioners
Insolvency practitioners who are employed by businesses with more than 20 employees are exempted from lodging an STP report on behalf of their employer for the financial year 2018-19. However, if the business has already started its STP reporting process, then insolvency practitioners can choose to do the same especially if they have access to the business’s payroll software.
It is worth noting that while the ATO doesn’t require notifications when it comes to exemptions, it is best to keep records of exemptions for future use.
Exemptions for redundancy schemes and long service leaves
For long service leave and redundancy scheme administrators that are still using the traditional payroll submission method, they will be exempted from STP reporting at least during the financial year 2018-19. For businesses with more than 20 employees, they will be required to report all relevant payroll information via STP.
STP exemptions for foreign employees
• The foreign employee is from an offshore company or a non-resident for the purpose of Australian taxation
• The foreign employee’s salaries and remunerations are all paid for by an offshore entity
• The foreign employee is seconded to Australia
• The business maintains a shadow payroll plan for the foreign employee
Keep in mind that the business will have to report foreign employees who do not comply with these conditions to the ATO.