Single Touch Payroll (STP) Your Questions Answered

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1 Single Touch Payroll (STP) Your Questions Answered 1

2 Thank you for taking the time to submit a response to the Single Touch Payroll (STP) discussion paper. This initiative is still under consideration by Government, and as such much of the detailed design is yet to be finalised. Within this document we have endeavored to answer as many of your questions as possible. Where we have not published a response to a question asked, you can be assured that all questions have been recorded and are being taken into consideration during the design and consultation phase. Feedback from business, industry, software developers, intermediaries and the wider community has been valuable in helping us understand the potential benefits and impacts of STP. After listening carefully to the feedback from a broad range of participants, the Government asked us to consult further on Option 2 mandatory reporting and voluntary payments as well as the streamlined onboarding component Given this, we continue to consult with industry groups and business on a revised proposal to test: real time compulsory reporting of payroll information to the ATO voluntary real time payment of PAYGW and Super Guarantee as an option running pilots with small business from July 2016 to test various scenarios, including simplifying the process of bringing on new employees with streamlined TFN declarations and Super Choice forms, and the timing for implementation. The most recent Government announcement on 10 June can be accessed here: 2

3 Q Consideration will need to be given to how to handle the situation when an employer goes live on STP during the middle of the year. For example, if an employer goes live on the 15th of September, how will they handle the period from the 1st July to 14th September? Will they issue payment summaries just for this part of the year? Q Consideration must be given to what will happen when an employer transitions to STP part way through a financial year. Does this mean that a Payment Summary must still be issued to an employee for that part of the year when they were not paying through STP? A The following answer applies to the above two questions. This is still under consideration as part of the design phase however, consultation with software developers is occurring to determine the best approach. Options under consideration include reporting YTD figures on the first STP report for capture by the ATO or producing STP 'catch up reports' for the pay periods prior to go live date. Q If payment summaries are no longer issued, how will individual allowance/deduction amounts currently shown on the payment summary be reported to an employee by the employer? A Where the only detail reported on the payment summary is PAYGW related and reported via STP, it is anticipated that the payment summary will no longer be required. However, we are currently considering through detailed design how employees will be able to view this type of information through mygov. Q How will Lump Sum E details (individual dates and amounts) above the threshold be reported to an employee by an employer under STP? A These details will be reported via a STP reporting event where appropriate. Q Will payroll software need to keep an exact copy of the data sent, or will it be sufficient that it can rebuild the data sent from the source data? A Record keeping and back-up facilities are usually offered by software and payroll providers. We would recommend confirming this feature with your provider. Further advice on record keeping obligations can be found on ato.gov.au Q Are all payment summary types (such as Superannuation Income Stream and Foreign Employment Income) in scope for STP? A This is still under consideration as part of the design phase. Payment summaries which are not being considered for inclusion are: Withholding where ABN not quoted Interest dividend and royalty payments paid to non-residents Departing Australia superannuation payment (DASP) Natural resource payments to foreign residents Foreign residents Super Income Stream. 3

4 Q How will the Single Touch Payroll system deal with mistakes? An increased regularity of PAYG withholding and SG payments will lead to an increased prevalence of mistakes made with these payments. Will there be a streamlined process of recovering overpayments made by employers? Q What/if any transitional provisions would be needed to aid such a transition? For example, should existing business operators enjoy a transition whilst newly established business are required to pay SG contributions more frequently? Q What happens if there is only enough money to pay wages and salaries? Will businesses pay staff their net pay but not actually process the payroll until they have the funds to pay the tax and SGC? How do errors get corrected if already reported electronically? Q If remittances are aligned to the time when employees are paid, what will this do to the level of debt already owed? A The following answer applies to the above four questions. During consultation, three potential options were being considered by Government: Option 1: Mandatory real-time reporting and real-time payment of tax and superannuation obligations for all employers at the time of the payroll event Option 2: Mandatory real-time reporting and voluntary real-time payment Option 3: Leave the current processes in place. Feedback told us that mandatory real-time payment will not be achievable for many businesses. Given this, the Government has asked us to further consult on option 2 mandatory real-time reporting and voluntary real time payment. Businesses will be able to make payments in advance of their obligations if that suits their business model. Refunds of overpayments will be addressed in the co-design phases of the project. The ability to amend and make adjustments is being catered for in detailed design.\ We are currently working through the detail regarding allocation of payments where there is existing debt. 4

5 Q Should the ATO be granted powers which allow the Commissioner to play a greater role in determining when SG contributions are made (e.g. to provide some extensions to reliable business payers and tighter deadlines for businesses which regularly miss payment deadlines). Or should fixed payment deadlines continue to be enshrined in legislation? A Superannuation legislation is a matter for Government and as such we are unable to respond to this question. Q Is the proposal to remove the total declaration of RESC? Is the proposal to remove the declaration of RFBTA? If the concept is that these amounts will now be reported every pay run then the compliance burden has drastically increased. A We are currently working through options on how to cater for reporting of RFBA/RESC. We note the concern about increasing the compliance burden, so are considering this in detailed design. 5 Q Is government removing the obligations to declare information to an employee? How are the Fair Work laws around payslip requirements going to be changed and also how do you propose to change the typical employee expectations to receive this information? A payslip obligation includes declaration of YTD amounts. Is the proposal to remove this obligation? A At this stage, employers will still need to supply a payslip in line with their Fair Work obligations. Q What are the details behind the compliance actions (follow up activity) by ATO or others in terms of now seeing the late or lack of SG payment? A The ATO's compliance activity will use the current principles of tailored engagement based on risk. More visibility of client behaviour and choices through additional and more frequent data collected under STP will allow us to create more accurate profiles and importantly, engage earlier with those that need additional help to get things right. For the minority that choose not to comply, increased visibility will mean increased attention from the ATO, again depending on their profile. Q Should small business operators be allowed to use an employee s SG and other super contributions in their business for any period of time? A Currently, employers must pay super regularly for each of their eligible employees. Payments must be made to complying funds or retirement savings accounts, be at least the minimum amount, and must be paid before the due date each quarter. These payments are tax-deductible in the financial year you pay them. If employers do not meet these obligations, they could lose their entitlement to a deduction and may be liable for a range of penalties. STP no longer proposes to change the current payment obligations regarding SG. Any change to policy and related law is a matter for Government. 5

6 Q One ABSIA member has reported that one client reversed a pay run for almost 1,000 employees over 20 times in a single day. This situation would have resulted in 50,000 transactions going to the ATO. Will the ATO systems cope with this? Has there been consideration of situations such as these? A We anticipate that payroll software would ensure that transmission of the STP report to the ATO would be one of the last steps in payroll processing, to ensure that reversals can occur until payroll is certified as correct within the business. This approach means multiple reports would not be delivered to the ATO in this example. Q Has monthly reporting been considered as an option instead of reporting and the making of payments of PAYG and superannuation at the time of the pay taking place? A STP seeks to reduce administration time and therefore cost for businesses by utilising an existing business process (payroll) to fulfil reporting obligations. Monthly reporting would be an additional administrative process and so it would not achieve the same efficiency. Q To what extent has the STP project considered the interoperability issues between senders and receivers of data in implementation planning to ensure an orderly and controlled implementation of STP? A We are consulting with SBR to ensure effective operability - message formats are being considered. Q Would the cost of requiring contemporaneous or more regular payment of the SG contribution impose an onerous compliance cost on business (or some businesses more than others)? A During consultation we heard that more frequent payment of both SG contribution and PAYGW tax would cause cash flow issues, in particular for small business. This is why STP no longer proposes to change the current payment obligation regarding both SG and PAYGW. We also heard that for some businesses, more frequent payments would help them better manage cash flow. Given this, we will be ready and able to accept payments at the payroll event from those who choose to do so. The cost of compliance was raised, but not specifically in relation to payments; it was raised in terms of acquiring a software solution. Q What about ETP Payment Summaries? Will they still need to be printed and issued to employees under STP? A ETP payments are in scope for Single Touch Payroll reporting, thus removing the requirement for employers to provide an ETP payment summary. 6

7 Q Given the scale and scope of STP as well as the already legislated SuperStream requirements for both employers and superannuation funds, to what extent do SuperStream and STP overlap or are potentially in conflict and what is the proposed way to identify and mitigate the risks and opportunities? A As the STP Design develops, our understanding of areas of overlap between SuperStream and STP is growing. SuperStream representatives are involved in discussions with software developers and the project team is working directly with SuperStream development staff to align definitions and requirements. Q How could the STP project (and all affected stakeholders) leverage from the lessons learnt from the SuperStream program? How does the ATO propose to facilitate this in conjunction with key stakeholders? A The STP project team includes a senior leader from SuperStream and internal sharing of lessons learned is ongoing. The ATO's partnership with software developers also ensures their experiences with SuperStream are being taken into consideration in the early design stages of STP. Consultation with the Superannuation Industry has taken place and will continue to ensure there is ongoing opportunity to discuss the SuperStream experience. Q Based on the proposed timetable in the STP consultation paper there is a clear overlap of activities affecting both SuperStream and STP. Has the ATO considered the capacity for employers (and agents) and the superannuation funds (and agents) to work on both programs? How will the ATO ensure that the introduction of STP is not putting the success of the SuperStream program at risk? A Current thinking regarding the implementation dates for STP is that the 2016/17 financial year would be used to conduct a pilot of STP. Implementation of SuperStream is due to finalise 30 June The appropriateness of this approach will be discussed in further consultation over the coming months. Pilot participants would be volunteers so they would make their own assessment of their ability to manage this. A Government decision regarding implementation dates for STP will be made following further consultation and review of the pilot. This will take into account progress in the implementation of SuperStream and other factors in the business environment. Q It appears that the ATO is treating both SuperStream and STP as two discrete programs yet it is clear that one million employers and their agents (payroll and payroll software providers, bookkeepers, tax agents etc.) as well as the superannuation industry will be impacted by both programs. What is the ATO s proposed governance framework to manage both programs simultaneously and how will it consult and engage with the affected stakeholders? In particular, how is the ATO proposing to consult and engage with the superannuation industry? A In addition to the above response, the STP project team includes a senior leader from SuperStream and internal sharing of lessons learned is ongoing. The ATO's partnership with software developers also ensures their experiences with SuperStream are being taken into consideration in the early design stages of STP. Consultation with the Superannuation Industry has taken place and will continue. 7

8 Q To what extent has the STP project considered the appropriateness of treating the superannuation industry the same as employers? What additional benefits are achieved and how do they compare to the additional cost to superannuation members? Has the ATO consulted with the superannuation industry in relation to treating superannuation funds as payers and if so, who were the participants and what are the outcomes from this consultation? A Final decisions on matters of policy will be made as part of ongoing discussion with government. We are aware of the concerns raised and have communicated these to Government. We have consulted with the Superannuation industry and will continue to do so. Q Has the ATO consulted with the life insurance industry who are also payers when making regular and once off disability payments within and outside the superannuation environment? A Final decisions on matters of policy will be made as part of ongoing discussions with government. We are aware of the concerns raised and have communicated this to Government. Q Has the STP project considered the impacts of increasing contribution activity by 400% in terms of transaction cost (both payments and data messaging) for employers and funds, increased error reporting and the ability for the SuperStream network to handle the increased volume including the ATO enabling services provided under SuperStream? Has the ATO considered the impacts on stakeholders in terms of SuperStream readiness by employers? A The STP proposal no longer includes mandatory SG payments at the time of the payroll event, therefore, there is no proposed intention to increase the number of payment transactions, except for those who voluntarily opt in to make payroll event based payments. We are forecasting based on expected volumes and will go through performance testing. We expect that response times may be affected during peak times. Q Has the change in frequency by superannuation funds in reporting and paying been considered by the ATO in light of the proposed changes to the Superannuation Data and Payments Schedules which include reporting to the ATO by superannuation funds? What are the impacts of STP on the Schedules which were released by the ATO on 3 March 2015 for consultation by the industry? A The draft schedules issued by the ATO on 3 March only cover the extension of the standard to include rollover and contributions transactions between employers and trustees and government and trustees. This follows the pattern implemented by industry, which supports the recurring nature of contributions between employers and funds. The ATO is continuing co-design on future changes to other reporting obligations between the ATO and Superannuation funds, and will be looking for opportunities to ensure the obligations under STP and changes to other fund reporting obligations in the future, can be aligned. Any future changes would be undertaken in consultation with industry and be incorporated into an agreed release schedule in line with any announcements by Government. 8

9 Q There was no mention of real time reporting / payment for defined benefits superannuation via Single Touch Payroll. How would this later be reported if annual payment summaries are no longer required? Same with the Reportable Fringe Benefit number. A The final scope of STP is a matter for Government to confirm, so we cannot answer your question specifically. However, we value these issues and questions being raised so that we can ensure that all the issues are taken into account as part of this process. Q Cessation of Employment we note that the Single Touch Payroll initiative will allow various government departments to be alerted when an employee ceases employment via a cease employment indicator. Aside from not having to then issue separation certificates as a result, does this also mean ETP Payment Summaries (technically required to be issued 14 days after termination) will no longer be required as well? A The Eligible Termination Payment itself will be captured under the STP payroll event. Therefore the ETP payment summary will no longer be required. The first phase of STP will not remove the need to provide separation certificates where requested by staff. Q Within all of that the entire country is not operating under the best quality internet system. What happens if the download/upload process is not sufficient to deal with the requirements to get this information to the ATO etc. What happens out on the Nullarbor Plain, for example? Is there sufficient internet access to allow this all to happen? Do all business owners have computer systems and know how to use them. A The ATO aligns with the Australian Government s commitment to transform the way public services are designed and delivered, making them simple and easy to use. The quality and range of services expected by the Australian community points to digital interactions becoming the most common way to interact with government in the future. Where the ATO provides a digital service, support will be available for those without the resources and ability to interact digitally. This support depends on individual circumstances and may include helping individuals and businesses to use digital services or, where appropriate, providing them with an alternative non-digital channel. Q Is there any consideration being given to micro businesses who have only manual books with no business requirement for a computer or the internet? Is there any consideration being given to micro businesses who do use computerised software for payroll but who have no need for the internet or the associated financial cost involved? A The ATO is currently working with software developers to explore options of low/no cost software to minimise financial impacts for small business. 9

10 Q Until the ATO make this mandatory for either fortnightly or monthly reporting our software vendor may not make the functionality available / developed. Then will it be a CSV file? A There will be no CSV file. A transition approach is being developed which will have options for employers and software providers to meet their reporting requirements. Q If the ATO is to validate the details at what point would this be done? When the pay run was complete and other data (PAYG, etc.) is sent? too late by then for payroll staff if there is an issue, or When the details are entered in the payroll system? does this mean we would have to be logged into the ATO at various times or constantly? A Your accounting platform will have it's own validation. When your software engages with the ATO under STP, your information will be further validated by a lodgement service. Q In our business we have different payrolls with different pay cycles weekly and monthly. How will we stop this reporting if we don t want it to go to the ATO? i.e. an employee on the weekly payroll moves to the monthly payroll. That employee is terminated off the weekly payroll and is set up on the monthly payroll. If there is reporting to the ATO of terminations then this isn t a termination as such. How could we differentiate from a normal termination so it isn t reported? I assume it would matter where for instance that employee had a child support deduction arrangement and that reporting could trigger a response from the CSA when it wasn t needed. Would we be able to edit the information (but not in the payroll software) before it is reported? A Situations such as these will be considered in co-design with software developers and businesses. Q Will the Single Touch Payroll system extend beyond employers? For example, will pension or lump sum payments made by superannuation funds (which may require PAYG to be withheld) need real-time reporting and payment? Self managed superannuation funds, in particular, will encounter a greater deal of administrative red tape if Single Touch Payroll extends to capture superannuation payments. This is also in addition to requirements already faced with the introduction of SuperStream. A Final decisions on matters of policy will be made as part of ongoing discussion with government. We are proposing that for the initial phase, these types of payments will not be included for Single Touch Payroll reporting purposes but they may come under the STP proposal as part of a later implementation phase. We will work with the payers impacted as to when and how that might occur. 10