Small Business

With Single Touch Payroll (STP) on the horizon for all Australian businesses, it will have
different implications for different owners. We spoke to the experts from the Australian
Taxation Office (ATO) about some of the advanced elements of STP.

For some, it will mean little more than hitting an extra key each pay run. For others, it
will usher in a new chapter in managing outstanding debt with the ATO.

So beyond the basics of Single Touch Payroll, what can Australian small businesses
expect for the new financial year?

The hard deadline for STP adoption

The ATO wants all small businesses with 19 employees or fewer to begin using Single
Touch Payroll from 1 July 2019, with a deadline of 30 September 2019.

In what has been described as the biggest shake-up to the tax system in 20 years, STP
will give the ATO visibility over employees’ gross, net, tax and superannuation details.

A spokesman for the ATO said it would allow for “the earlier identification of late and
non-payment of tax and super amounts by employers, which should make any debts
easier to pay”.

Who will STP impact most?

While this reform will have little impact on businesses that have their finances in order,
it’s a different story for business owners that may be struggling with cash flow or trying
to repay a large tax debt, as they will be under pressure to clean the slate with the ATO
on a regular basis.

But there is good news. The ATO says Single Touch Payroll will help employers identify
small problems, such as unpaid superannuation liabilities, before they get out of control.

It’s been speculated that the rollout of Single Touch Payroll could save the government
billions of dollars. While the ATO has been tight-lipped about any specific targets, it’s
likely that those billions of dollars will come straight out of the pockets of business
owners.

“It is difficult to quantify at this stage what impact this will have on the outstanding
debts of business to the ATO given the range of factors that influence a business’s
capacity to pay,” an ATO spokesperson said.

The ATO no longer an option as short-term creditor

Australian businesses owe the ATO $23.7 billion, with small business accounting for
well over half that amount ($15.1 billion). Single Touch Payroll will give the ATO instant
visibility over outstanding debts, and when they identify a problem they will seek to
address it promptly.

Dealing with the ATO is a serious and unavoidable part of doing business, so it’s
important every business owner takes the ATO’s questions seriously and deals with
them promptly. The STP crackdown will see businesses with lumpy cash flow pressured
to clear their debts to the ATO sooner.

Possibility of payment plans

In a positive move, small business owners who are struggling with outstanding ATO
debts may be able to arrange a payment plan. The ATO put in place some 790,000
payment plans throughout 2017–18.

The ATO also recently lifted the ceiling for arranging a payment plan through an
automated phone call from $25,000 to $100,000. But if you have a debt greater than
$100,000, you will need to call the ATO and discuss your situation personally.

It’s important to remember that payment plans are suitable for some businesses –
but not all. If your small business has cash flow problems, a business loan from an
alternative lender may be able to help you clear your ATO debt before the 30 September
deadline.

What happens if you fail to pay on time?

If your small business has a plan in place but you default and can’t pay the ATO on time,
you will be charged interest on your debt. Your case may also be referred to a debtcollection agency.

In a worse-case-scenario, you may have your assets taken via a garnishee order, which
means the ATO can take what is owed from your bank account. But don’t fret just yet –
the ATO says it only issues garnishee notices in 1.1% of cases and is considered the last
resort.

Having said that, the ATO is a meticulous and powerful government body that will use
every tool at its disposal to recover any debts owed. Their resources are also virtually
limitless, with the latest Federal Budget committing an extra billion dollars in funding
to the ATO.

SMB credit ratings may suffer

In the past, the ATO was not allowed to share information about your debts with third
parties, such as credit rating agencies. However, there is now legislation waiting to be
passed that will allow the ATO to do just that if you fail to engage with them.

For small business owners who don’t follow the rules, the result could be damage to
their credit rating and an increased cost of credit.

The bottom line

Overall, Single Touch Payroll is a positive development that will boost productivity
and bring payroll into the 21st century. Small businesses will no longer have large ATO
debts hanging over their heads, and credits will likewise be returned quickly and more
efficiently.

It will also see all employees get paid their legislated superannuation benefits and will
ensure no small business has an unfair advantage over the majority of owners who pay
on time.

To avoid damaging your credit rating, talk to your broker about whether a small business
loan could get you back on track.

Chris Connolly
Connolly Wealth Management
Level 1, 441 South Road
Bentleigh VIC 3204
(P) 03 9591 8000
(F) 03 9530 8375
(E) chris@connollywealth.com.au
(W) www.connollywealth.com.au

Disclosure: Christopher Connolly (280099) and Connolly Wealth Management Pty Ltd (333350) are Authorised Representatives of Wealthsure Financial Services Pty Ltd AFSL 326450.

Disclaimer
The information on this website is provided for general information only and does not take into account your personal situation. You should
consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from financial, legal and
taxation advisers. Although every effort has been made to verify the accuracy of the information, we disclaim all liability (except for any liability
which by law cannot be excluded), for any error, inaccuracy, or omission from the information or any loss or damage suffered by any person
directly or indirectly through relying on this information.

Sources; http://prospa.com.au

The arrival of Single Touch Payroll is being described as the biggest revolution in tax
since the GST was introduced in July 2000. But wrapping your head around how it
all works can seem challenging from the outside. We spoke to the experts from the
Australian Taxation Office (ATO) about what small businesses need to know.
In principle, it’s simple. From 1 July 2019, all businesses with fewer than 20 employees
will be required to report their employees’ payroll information to the ATO every time
they pay them.
This isn’t a completely new development. Businesses with 20 employees or more have
already been using Single Touch Payroll since July 2018.
But while the process may seem simple, there are still many implications for Australian
small business owners.

Payroll system upgrades

Single Touch Payroll will provide the ATO with real-time information whenever payroll is
completed. This means that businesses still using pen and paper will need to get online.
But don’t panic if you’re currently in this bracket. Recent estimates show as many as one
in five businesses will be making the change with you.
Thankfully there are some big benefits to making the switch. For example, businesses
that implement Single Touch Payroll with the relevant reporting software will be eligible
for up to $100 in tax relief.
If you need to implement or update the software but you don’t have the available cash
flow for the investment, speak to your broker about your options. A small business loan
could provide a short term cash-flow solution before the deadline hits.
For small business owners who already use accounting software like Reckon, Xero or
MYOB, the transition will be relatively hassle-free. Like the name suggests, it will require
the ‘push’ of a single button to send the data to the ATO at the time payroll is made.
For these small businesses, the cost of the functionality associated with Single Touch
Payroll is only around $10 a month, or a little more. While 40,000 businesses already use
Single Touch Payroll, there will soon be a wave of newcomers, as approximately 700,000
more will need to start using it before 30 September 2019.

Payroll information and superannuation

Single Touch Payroll will send the ATO a range of information, including gross, tax,
net and superannuation details. This is important because not all businesses pay
superannuation entitlements in accordance with the law.
Unpaid superannuation liabilities were also singled out in the recent Federal Budget.
The ATO will be provided with additional funding to pursue businesses for not meeting
their obligations.

ATO debt

The ATO says it’s owed $23.7 billion from Australian businesses, with small businesses
accounting for $15.1 billion of that figure – well over half. Having instant visibility means
the ATO is in a better position to manage debtors and have fewer debts outstanding.
The ATO wants to reduce the amount of outstanding debt and stop Australian
businesses using it as a revolving line of credit. Some suggest there could be billions of
dollars in savings for the government should the program go to plan.

STP exemptions

The ATO says the first year of operation will be one of transition, and penalties will
generally not apply until later. However, the Single Touch Payroll legislation includes a
penalty for making false and misleading statements in any report.
The Commissioner of Taxation has the discretion to correct a mistake without penalty,
but if an employer knowingly reports false information and doesn’t correct it within 14
days, they will be open to further action.
“Our approach will be flexible, reasonable and pragmatic. Our immediate focus will be
on helping micro employers transition to STP rather than penalising non-compliance,”
an ATO spokesperson said.
Like all big changes, adjusting to new rules and regulations around tax can be
challenging. If you need to invest in software updates or other preparations before
the transition, speak to your broker about how a small business loan could help.

Ensure your business is ready for this new compliance requirement with this handy
checklist from Reckon

Chris Connolly
Connolly Wealth Management
Level 1, 441 South Road
Bentleigh VIC 3204

(P) 03 9591 8000
(F) 03 9530 8375
(E) chris@connollywealth.com.au
(W) www.connollywealth.com.au

Disclosure: Christopher Connolly (280099) and Connolly Wealth Management Pty Ltd (333350) are Authorised Representatives of Wealthsure Financial Services Pty Ltd AFSL 326450.

Disclaimer
The information contained in this email and its links/attachments are general in nature and does not take into account your personal circumstances, financial needs or objectives. Before acting on any information, you should consider the appropriateness of it and the relevant product having regard to your objectives, financial situation and needs. In particular, you should seek the appropriate financial advice and read the relevant Product Disclosure Statement or other offer document prior to acquiring any financial products.

Your full financial needs and requirements need to be assessed prior to any offer or acceptance of a loan product.

Sources; Prospa Advance Pty Limited

Beyond the basics: Advanced Implications of Single Touch Payroll for SMBs