For a while there it looked like the ATO would introduce single touch payroll for all Australian businesses by July 2016, but after feedback from the businesses community that original plan has been shelved – for now. With SuperStream simplifying the way businesses manage the superannuation contributions for their employees, it’s highly likely that we’ll be seeing some form of the single touch payroll model in the near future.
Single touch payroll was an initiative developed to simplify the payroll process for Australian businesses. Currently, most businesses are burdened with a number of tax and superannuation reporting obligations, which single touch payroll would have put an end to.
What exactly was single touch payroll?
Single touch payroll, like SuperStream, was a proposed interactive tool that would allow a business’s accounting software to automatically report payroll information for their employees to the the tax office, eliminating the need for businesses to report pay-as-you-go withholding (PAYGW) in their activity statements throughout the year, as well as end-of-year employee payment summaries.
There was also a proposed digital service that would have streamlined tax file number declarations and Super Choice forms, which would obviously reduce a lot of the red tape and paperwork associated with employing staff.
Single touch payroll would have integrated with nearly all accounting packages in Australia, including MYOB, Xero and Quickbooks, just as SuperStream does now, so why was it shelved by the ATO until further consultation with the business community?
Single touch could have caused cash flow problems
The main concern for many businesses was that single touch payroll would impact their cash flow by requiring employers to pay the tax withheld from wages and super guarantee payments at the same time they paid their employees’ wages. There were also concerns about whether compliance by July 2016 was realistically achievable for the majority of businesses, especially when the SuperStream changeover is still ongoing.
For businesses with a substantial number of employees, single touch payroll could have been a godsend. Unfortunately, the original proposal alienated smaller businesses by making it necessary to pay both tax and super guarantee payments at the same time as employee wages, when most employers currently make those payments to the ATO each quarter.
But that doesn’t mean the single touch payroll system has been scrapped altogether. The ATO, in consultation with industry groups and the Minister for Small Business, is working on developing another single touch payroll scheme that will make real-time payments for withholding and super guarantee payments voluntary, which will be tested with small business owners before it’s rolled out across the board.
There’s still life in single touch payroll yet
What single touch payroll really highlights is how important it is for small businesses to make sure that they’re using a current accounting software package – and there are many on the market, developed especially for small businesses – that supports SuperStream and will also support any other ATO initiatives, like single touch payroll.
If you’re not using an accounting package for your small business, it’s wise to choose one of the major accounting software providers, which Margaret Carey of Business EEz also suggested when we spoke to her not so long ago about SuperStream.
You can read more about SuperStream and the new measures the ATO has introduced to make payroll and superannuation compliance easier for small businesses by subscribing to our blog. Alternatively, if you’re a small business owner using either Xero or MYOB and you’d like to know how to properly setup and use payroll in your accounting software, enrol in one of our MYOB or Xero training courses today.