ATO raises issues with Single Touch Payroll

Single Touch Payroll, ATOThe ATO has raised a number of potential issues with Single Touch Payroll, as part of a consultation process.

Single Touch Payroll is a system which the Government says will “cut red tape for employers by simplifying tax and superannuation reporting obligations,” by reporting PAYG withholding and Superannuation Guarantee obligations at the same time as salary and wages are paid.

Benefits of Single Touch Payroll

The ATO says that paying PAYG withholding and Superannuation Guarantee at the same time as salary and wages will “smooth out the cash flow spikes” for businesses.

“The increased transparency and frequency with which tax and super obligations are met would improve the risk credentials of business, and could be reflected in lower lending rates to business,” said the ATO.

“Single Touch Payroll will be able to achieve more significant red tape reductions if it is extended to include payment functionality, so that employers can remit PAYG withholding and the SG using their software at the same time that employees are paid.”

Costs of Single Touch Payroll

Though Single Touch Payroll would smooth payments by employers, the ATO says this will “result in cash flow impacts, particularly on transition.”

During the transition period businesses would need to pay the full amounts for the previous period while also paying the newly accrued PAYG withholding and Superannuation Guarantee.

The impact will be minimal for employers which pay or set aside amounts each pay cycle, but employers who do not could face new cash flow issues.

The ATO says Single Touch Payroll could lead to increased “market pressure within particular industries to reduce the number of days before invoices are paid.”

“Employers will need to upgrade their existing payroll software or acquire compatible software to fulfil their obligations under Single Touch Payroll”

The ATO acknowledges that Single Touch Payroll will “not address the issues associated with accruing large PAYG withholding and super obligations that some employers have difficulty meeting.”

Single Touch Payroll: potential implementation timetable

The ATO lists these as potential implementation dates for Single Touch Payroll:

DateEmployers withholding >$100,000Employers withholding <$100,000
July 2016Employers “strongly encouraged” to use Single Touch PayrollEmployers can to transition to Single Touch Payroll
July 2017Employers required at law to use Single Touch Payroll.Penalties may apply, but so do “generous exemptions.”Employers “strongly encouraged” to use Single Touch Payroll
July 2018Employers expected to use Single Touch Payroll.”Exemptions may apply in exceptional circumstances.”Employers required at law to use Single Touch Payroll.Penalties may apply, but so do “generous exemptions.”
July 2019Employers expected to use Single Touch Payroll.”Exemptions may apply in exceptional circumstances.”

Update: We have heard that, following consultations, the start date for Single Touch Payroll may be pushed back.

Update #2: The Government has announced that the start date for Single Touch Payroll will be pushed back.

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