The connection between STP and Superannuation payments
We’ve been using Single Touch Payroll (STP) for nearly a year and have found it easy! The ATO have been supportive while we’ve been learning, so if you’re an employer who hasn’t set up STP yet, it’s a good time to start the conversation before 1 July 2019.
If you pay anyone as an employee, even just once, you will need to understand these concepts:
- The ATO wants to see what you are paying to your employees before you send in the Payment Summary report at the end of the year, so they are asking for year-to-date figures after every payrun instead.
- If you successfully report your payroll figures using STP, the ATO does not want Payment Summaries done at all – employees can log into their myGov account to see their salary and wages instead. In fact, they can see it in myGov at anytime during the year.
- The software you use for payroll will probably have a button to click at the end of each payrun, to send the updated year-to-date figures to the ATO. It is very simple.
- Before you start reporting STP, please ask your Bookkeeper or Accountant to reconcile your payroll to date, and link the payroll categories correctly in the back end of the software. This could prevent a mess and audit later on.
- If your software doesn’t have a button to click for STP, there are other ways to report it. If you have less than four employees, your Accountant or Bookkeeper may be able to report it for you. Have a chat to them about it.
The link between STP and Superannuation
STP gives real-time payroll data to the ATO. They will know how much PAYG tax the employer needs to pay in the next activity statement (BAS). They will also know how much superannuation the employer needs to pay to the super clearing house, and when. Developments in this space are likely; eventually we may need to pay PAYG tax and superannuation at the same time as the payrun.
The Superannuation Guarantee Charge Amnesty was never legislated, so any employers who have fallen behind in their employee super payments need to start taking this very seriously. Here’s why:
- Superannuation audits have no time limit, so the ATO can request records from more than seven years ago.
- Late paid super cannot be claimed as a tax deduction by the employer. For small companies, this can mean that paying $5000 super payment late, costs another $1375 in income tax at the end of the year. That’s one impressive ‘late fee’!
- There is also an official late fee called the Superannuation Guarantee Charge; it includes 10% interest and a flat fee of $20 per employee per quarter. This is no tax deductible either. The proposed amnesty was going to lift this penalty during 2018-2019 but it didn’t pass parliament, so it needs to be paid for all late super payments.
The most frustrating obstacle for employers trying to pay super on time, is missing information from new staff. We recommend having strict on boarding requirements (no work until information is complete), especially for backpackers who may leave the country before they provide a tax file number. If the lack of information from an employee is holding up a superannuation payment, we also recommend that you pay the super for all other employees on time, and catch up the rest later.
Being an employer is not easy and we’re here to support you with challenges like STP and super payments. If you are not sure about your obligations or how to best manage the problems that arise, you are welcome to talk to the team at The Money Edge.
The Money Edge | Bundaberg