Understanding STP and its benefits
By Robin Beauchamp, CEO, Integrated Payment Technologies (InPayTech)
The Federal Government is arming the Australian Taxation Office (ATO) with additional funding to monitor employers who are not paying correct superannuation guarantee (SG) entitlements to their employees.
Employers’ failure to meet their SG obligations has long been a problem since the introduction of the system of compulsory superannuation in 1992.
A Senate Economics References Committee recently said it is deeply concerned by analysis by Industry Super Australia that suggests employers failed to pay $5.6 billion in SG contributions in 2013-14. No doubt that number has climbed since then given wages and employment growth.
To firmly crack down on this problem, the Government is providing the ATO with additional funding to monitor employers’ non-compliance. The package includes requiring employers to adopt Single Touch Payroll (STP) reporting to to ensure SG payments meet the minimum payment frequency (quarterly) and introducing greater penalties for employers where they don’t pay the right amount of superannuation to their employees.
What is STP?
Single Touch Payroll (STP) involves automating an entire transaction from start to finish by using software to eliminate paper-based work. As payment reporting is fully automated, STP reduces the possibility of reporting errors while introducing greater transparency due to the ATO being able to monitor all aspects of wages and superannuation payments.
In terms of superannuation, the Federal Government will require employers to begin adopting STP for SG payments from 1 July 2018.
The key components of STP include:
- Employers report on an employee’s salary and wage amounts (including ordinary time earnings) and PAYG withholding amounts to the ATO; and
- Superannuation Funds report on superannuation contribution information to the ATO at the time payments are received.
- Employers with 20 or more employees will need to transition to STP from 1 July 2018 with smaller employers being required to adopt STP from 1 July 2019. This will align employers’ payroll function with the regular reporting of taxation and superannuation obligations to the ATO.
The benefits of STP
When employers report their employee’s ordinary time earnings using STP, this will enable the ATO to calculate a reasonable estimate of their employees’ SG entitlements. Where employers aren’t paying the correct amounts, the ATO will be able to step in to require employers to pay their SG obligations. This will reduce the ATO’s reliance on employees to report non-compliance by employers. This is a good thing; often workers may be reluctant to ‘dob in’ their boss or may not even be aware they aren’t receiving the correct amount of superannuation.
The collection of superannuation contribution data through STP will also enable the ATO to display this information in individuals’ MyGov accounts, Australians will therefore have easier access to information about their superannuation via this government platform which houses much of their taxation, medical and other records.
Additional action on super
Other measures the Turnbull Government is taking to enforce SG payments include requiring superannuation funds to report to the ATO more frequently SG contributions received from employers (at least monthly). This will enable the ATO to identify non-compliance earlier and take prompter action against non-compliant employers.
The Federal Government is also improving the effectiveness of the ATO’s recovery powers, including strengthening director penalty notices and using security bonds for high-risk employers, to ensure that unpaid superannuation is better collected by the ATO and paid directly to employees’ superannuation accounts.
The Government is also giving the ATO the ability to seek court-ordered penalties for employers who are repeatedly caught failing to pay their SG liabilities.
The bottom line
STP processing will also go a long way to reducing employers’ non-payment of their SG obligation and reducing this ‘wage theft’, as it has been called.
InPayTech is an ASX-listed technology company that has developed a software as a service system, called PayVu, to help employers meet their new STP requirements. PayVu fully automates payroll, superannuation and taxation payments to the same day and reports these payments to the ATO using STP. Importantly, PayVu reduces the transaction time of superannuation payments from the average of 4.2 days (if a clearing house is used) to payment the same day.
So, employers will be able to take control and automate the payroll process. No more writing cheques or manually inputting wages and superannuation data.
PayVu will sit as an overlay on top of the New Payments Platform (NPP), which will be launched in November 2017. The NPP will enable businesses and government agencies to make faster payments, with near real-time funds availability to the recipients. Payments will be data rich and fully transparent.