A new standard for Australia
A new standard for Australia
The move to Single Touch Payroll Reporting (STPR) sets a new standard for payroll reporting in Australia.
From 1 July 2018, businesses that employ more than 20 people will be required to align with the Australian Tax Office’s (ATO’s) Single Touch Payroll Reporting (STPR) requirements.
The change means the ATO will be collecting payroll data in real time. As an employee receives a payslip, that information, including tax and superannuation payments, will also be electronically transmitted to the ATO at the same time.
It’s a change that will have particular implications for the way a large number of franchises manage their payroll requirements. The threshold for mandatory participation includes businesses with 20 employees of any sort, not just full time staff. Franchises are often above this level due to the nature of their workforce, one that is made up of casual and part-time workers. Thankfully, the change is something franchises can start to prepare for now starting with a review of their current payroll system and processes.
Why this change is so important
The move to STPR sets a new standard for payroll reporting in Australia. Most businesses will be used to form filling at the end of the month, quarter or year, but now the ATO will have access to real-time transactional data.
This then means their compliance activities will be completed in real time, which we think will begin to change the way they engage with taxpayers when issues do arise. The change could also affect the way this information is shared between other agencies, as it aligns with the ATO’s current information sharing agreement. This means, for example, the ATO will potentially be able to share real-time payroll data with an agency like Centrelink, instead of continuing to do it a year after the fact.
Superannuation payments will also be affected by the new STPR system. For the first time, the ATO is going to be able to match an employee’s payment to a superannuation fund to an actual real-time payslip, rather than waiting for an annual report from an employer with no guarantee the money has actually made it to the individual superannuation account.
Start early and be prepared
While the mandatory start date is 1 July 2018, there is an option to join voluntarily from 1 July 2017. Our advice is to prepare your payroll systems early for the change.
Use the 2018 financial year to review internal processes and implement whatever changes are required to be fully compliant come 1 July 2018. An important piece of the internal review process will be to ensure your current software provider has the capability to transmit the required data each pay cycle.
Why is it so important for the franchise market?
There have been statements made by both the Fair Work Ombudsman and Office of State Revenue revealing that, in the wake of the 7-Eleven case, authorities are particularly keen to review the franchisor’s systems and processes to determine whether these controls are adequate when it comes to ensuring franchisees are compliant.
Frequently, they’re finding there aren’t adequate controls in place in the payroll and HR areas of a business. When regulators don’t find these controls in place this is a red flag for both the franchisor and franchisee. With the Office of State Revenue in particular, if they find problems in one or two of the individual franchisees, it is likely the will audit the whole network, which is an incredibly expensive process to go through.
Human resources controls will make the difference
In our experience, there are two different ways franchisors approach their HR oversight and ensure the people their franchisees employ are treated fairly and paid correctly. On one side, there are franchisors who like to be really involved in these processes and how they’re rolled out across their network. On the other, there are those that take a more hands-off approach and trust that their franchisees are doing everything correctly.
Our concern for the franchisors that are currently taking this hands-off approach is what they may be exposing themselves to. Because of this real-time information reporting, the ATO are going be very well-informed before they investigate a business.
It’s a fact that should really spur the franchising industry into action. While there are a number of positives with franchising arrangements, such as that their processes are systemised across individual entities, these same systems can allow bad habits to replicate within them. This opportunity for stricter compliance that’s on the horizon should encourage franchises to start getting everything in order now so they’re prepared for the enforced changes.
What are the next steps?
Our advice is to review your current internal processes early to ensure you are ready come 1 July 2018. Consultation with your software provider will play an important part of the review to confirm they have the capability to interface with the ATO’s systems. Equally important will be the consultation with your accountant and business advisors to ensure your current business practices are compliant with the various federal and state taxes that will be under the spot light like never before.
It is anticipated that the ATO will start reviewing real time data from 1 July 2018, so those businesses that have planned early will be well placed to avoid any unwanted attention from the ATO.
Jason Daniels is a partner of Business Services at BDO in Brisbane. He is a qualified accountant, financial manager and business leader with more than 20 years’ experience. His expertise lies in all areas of financial management, especially mergers and acquisitions, business planning, forecasting, restructures, systems as well as process and operational improvement and software development.
He holds a Bachelor of Commerce Degree, is a Member of Chartered Accountants Australia and New Zealand.
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