Single Touch Payroll compliance could be a risk for many organisations across Australia. The impending changes from 1 July 2018 will bring new and additional compliance risks for Australian companies. And since businesses will be interacting with the ATO each pay event, this will require a new discipline in keeping payroll accurate and compliant all year round.
The payroll function is one responsibility that many business owners and financial controllers are happy to delegate. We all know staff must be paid correctly, on time and in a compliant fashion. However, compared with other more strategic responsibilities, payroll is often seen as a “set and forget” function.
The Australian Tax Office’s (ATO) Single Touch Payroll initiative, however, is about to escalate the relative importance of payroll compliance in risk management good practice.
Organisations with good payroll systems and processes can afford to relax somewhat. But in our experience, most organisations, unfortunately, do not fall into this category. Particularly at the SME end of the business spectrum.
The Australian taxation system is one of the most complex on the planet. The changing rules, requirements and obligations around the following are already a significant compliance challenge for payroll officers:
Fortunately, until now, the annual reporting of the earnings of employees has meant that any imperfections throughout the year have been able to be “hidden” in the aggregate amounts reported at the end of the year. With the full implementation of STP, this will no longer be the case.
Having all this data makes it easier for the ATO to detect errors. These discrepancies may trigger an audit or a review of the business. The ATO will now be accumulating data in real-time. You need to ensure your payroll records and reporting system are kept in order. It’s worth periodically cross-checking your records against what has been reported to date.
Organisations with knowledge or skill gaps in their payroll team. Organisations with sub-optimal payroll processes, systems or software. Are all vulnerable since details reported to the ATO will highlight their lack of full compliance. Organisations could be left open to ATO scrutiny and ultimately, the potential for a tax audit.
Even if a tax audit only uncovers minor infringements, the real cost of the audit is the disruption to normal operations. An audit means the organisation will need to provide details of transactions and answer a multitude of questions that follow. These disruptions can consume a significant amount of the financial controller’s and other executives’ time. And “time is money” as they say.
We’re not looking to stretch the fear mongering. However, in our experience, there is a very real possibility that audits also uncover tax imperfections in other areas of the organisation. Potentially opening a “Pandora’s Box” of issues in FBT, super compliance, depreciation or company tax obligations.
And that’s likely the ‘least worst’ outcome. Audits may also uncover significant compliance issues. These give rise to penalties, fines and recovery of undertaxed amounts.
So read more on getting ready for and reducing your risk around Single Touch Payroll (STP) via the related articles below.
Contact us if you would like to discuss STP compliant payroll software. Or if all of this looks like too much trouble, talk to us about outsourcing your payroll – an easy solution for ensuring ongoing compliance with evolving legislation.