STP becomes law for all employers
Legislation this week passed through Parliament will mean employers with 19 or fewer employees will have to report under the Single Touch Payroll (STP) regime by 1 July 2019. Employers with 20 or more employees came under these reporting requirements as from 1 July 2018.
“While it is appreciated that not all small or micro businesses are digitally ready for STP, their accountant is in the driver’s seat to assist them to meet these new reporting obligations,” said IPA chief executive Andrew Conway. “In fact, some 30 per cent of small businesses are still not on a digital platform and while cost may be a factor, some may well be missing out on many efficiency and productivity benefits that could help their business grow.”
Conway also acknowledged that for some micro businesses, a non-digital option may be a better fit to manage STP requirements, in the short term. He encouraged accountants to become cloud advisers to assist their clients’ transition to STP with the help of various tools that are available.
“Public Accountants are in the best position to help their small business clients transition to the digital world,” he said.
The legislation could unlock an additional one million hours of business productivity per week, boosting the economy by over $1.3 billion annually, according to research by global small-business platform Xero.
The introduction of STP legislation is expected to push more businesses towards adopting payroll software. The small-business owners who have already taken this step report have saved an average of 3.1 hours per week, according to the research, which also reveals that the large-scale migration of payroll reporting to digital platforms in Australia is expected to provide a $1.3 billion productivity dividend in FY19, in the form of one million hours saved per week in payroll processing alone.
Trent Innes, Managing Director of Xero Australia, said that the move to STP “will usher in a new era of digital connectivity for Australian businesses.”
“Technology is empowering people to take more control over their business, operate with more accuracy, security and efficiency – and by doing so creating a greater impact for themselves, their community and their economy,” Innes said.
Benefits of going digital
The research showed small businesses who have gone digital are reaping the benefits, with one in three (30 per cent) of these firms saying profitability had increased. Three in four (76 per cent) businesses surveyed said digitising payroll had freed up time and mental space for them to work on their business rather than in it, while three quarters (77 per cent) reported that it had reduced payroll errors.
In a finding that suggests the STP legislation will flow through to improved business productivity across Australia, more than half (51 per cent) of business owners surveyed by Xero who have already implemented a digital solution said that the change was helping their business save money.
However, one in five (21 per cent) were still using pen and paper to manage their payroll, likely contributing to the nearly 2 million payroll errors made every year by small businesses.
Barriers to digital adoption
Despite the benefits of specialised payroll software, the Xero report shows that two in every ten (19 per cent) small businesses with digital payroll systems currently are using software that is not STP-compliant.
According to Innes, simply installing a desktop or cloud-based payroll system will not automatically mean a business owner has met their compliance obligations.
“Business owners should speak to an advisor or their payroll provider to ensure they’re compliant. If you are an employer, make sure that your payroll software is STP-ready and that its STP reporting function is actually enabled,” he said.
This article was originally published on Inside Small Business.