Death, taxes and payroll – Single Touch Payroll

Benjamin Franklin wrote to French scientist, Jean Baptiste Leroy, in 1789 that “Our Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be certain, expect death and taxes.”
Now, whilst it is recognised that Franklin did not originate the phrase about the certainty of death and taxes, it is the most famous, earliest use and one that seems appropriate for payroll. If taxes are certain, then for organisations, so is payroll. And payroll in Australia is about to go through a significant change.

From 1 July 2018 all employers with 20 or more employees will be required to report to the Australian Tax Office (ATO) through a digital ‘real time’ reporting approach called Single Touch Payroll (STP). This is the single most important piece of legislation to affect employees and employers since the introduction of Pay-As-You-Go in 2000. However, it does not need to cause panic in HR, Finance or the Tax teams. STP will benefit companies through the auto reporting, more efficient payroll processes and improved new hire data being provided to you by the ATO (rather than the other way around). Furthermore, many organisations will take this as an opportunity to improve their payroll system and processing efficiency and accuracy.

The ATO is working through many aspects of the STP process and requirements – these will continue to be developed over the coming months. However, there are a number of areas of payroll that organisations can assess to prepare to be STP compliant.

There have been many articles written that seem to be scaremongering and misleading those running payrolls. To repeat, from the discussions Deloitte have had with the ATO and payroll vendors, whilst this is a significant change, it does not need to cause panic. We have developed an approach based on six dimensions to assess organisation preparedness and assist the planning for STP. We believe it is important to understand the challenge that an organisation faces to be compliant as it will differ by organisation and understanding the level of activity required is critical to planning. The dimensions for preparedness are:

  • Payroll Technology – the solution required to update the payroll system for STP, including level of customisation and integrations
  • Payroll Process – the level of standardisation and governance regarding payroll processes and the ease with which these can be updated for STP
  • Payroll Reporting & Governance – the standard of payroll reporting, its associated governance and data quality for payroll accuracy
  • Employment Taxes – the approach to taxation and superannuation requirements, and the impact STP will have on these practices
  • Communication – the extent to which changes are outlined to employees and third parties, including superannuation funds and unions
  • Onboarding and Offboarding Processes – the level of standardisation and technology support to update these payroll related and STP effected processes

Organisations need a measured response and robust plan which our full end to end approach helps to deliver and provide focus on the areas of greatest risk. Furthermore we believe that STP provides an opportunity for organisations to shine a light on their payroll function. Despite being as certain for organisations as death and taxes are to people, this area is often excluded from transformations. Organisations should take advantage of STP to improve technology, process, governance and reporting.

To start thinking about STP, consider the following questions:

  • How well does your organisation understand the key implications and impacts of the introduction of STP?
  • What lead time would your organisation need to ready itself for STP?
  • How would you assess the STP readiness of your payroll and onboarding providers?
  • How engaged are your key stakeholders, do they understand their STP obligations?

If you are interested in understanding how we are helping organisations respond to these questions and other aspects of payroll efficiency and accuracy, please contact the authors.

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