What is Single Touch Payroll (STP)?

Single Touch Payroll (STP) is an initiative by the Australian Government to streamline STP employers' reporting to government agencies. It involves reporting employees' payroll information each time you pay them through STP-enabled software. The payroll information includes salaries and wages, Pay As You Go (PAYG) withholding, and superannuation liability information. From 1 January 2022, the data collected through STP was expanded to collect additional payroll information, reinforcing the commitment to accurate and real-time reporting by STP employers.

For more information about STP, read our article here.

What is STP finalisation?

A crucial step in the Single Touch Payroll (STP) reporting process, STP finalisation is the culmination of employer responsibilities at the end of each financial year. As per STP-employer-reporting guidelines, a finalisation declaration is mandated by 14 July annually. This declaration not only concludes reporting for the relevant financial year but also ensures employees can access their finalised information for tax purposes.

The finalisation process exempts employers from the traditional requirement of providing payment summaries to employees and lodging a payment summary annual report. This shift, including reportable fringe benefits and meeting specific reporting deadlines, reflects a contemporary approach to STP, where the finalisation process takes priority over conventional practices, streamlining the handling of employee's pay information.

Due date for STP finalisation

The due date for STP finalisation is 14 July each year. However, there are exceptions. If the employer has 20 or more employees, the finalisation due date for closely-held payees is 30 September each year. If the employer has 19 or fewer employees and they are all closely-held payees, the finalisation due date will be their income tax return due date. If the employer has 19 or fewer employees and they're a mixture of both closely-held payees and arm's-length employees, the finalisation due date is 30 September each year for closely-held payees and 14 July each year for arm's-length employees.

Step-by-step guide for finalising STP

 As a small business owner, you can finalise STP by following these steps:

1. Ensure you are using STP Phase 2 enabled software. If you're not, you may need to upgrade your software or seek advice from your tax or BAS agent.
2. Check that your payroll information is correct. This includes ensuring you're paying your employees correctly, calculating their super entitlements correctly, addressing overpayments correctly, and maintaining accurate information such as names, addresses, and date of birth records.
3. Make an end-of-year finalisation declaration through STP by 14 July each year. This is important so your employees can access their information to complete their income tax return.
4. If you have closely-held (related) employees, you can choose to report actual amounts paid to them on or before the date of payment, actual payments made to them quarterly, or a reasonable amount quarterly.

Remember, if you can't make a finalisation declaration by the due date, you will need to apply for a deferral.

Accuracy of STP finalisation

 To ensure the accuracy of your STP finalisation, follow these steps:

1. Check your employees' Year-To-Date (YTD) amounts are correct.
2. Make sure you finalise the correct financial year. A common mistake is finalising for the incorrect financial year, especially when the declaration is lodged after 30 June.
3. Submit a finalisation declaration for all employees you've paid and reported through STP during the financial year, including those who may have only worked for part of the year.
4. If you've changed payroll software or Payroll IDs during the financial year, take necessary steps to ensure your employees' income statements are accurate and their income is not overstated.
5. If you identify that you need to make an amendment after you have submitted a finalisation declaration, lodge the amendment as soon as possible. Inform your employees when you make a correction that will be reflected in their income statement.

While the steps outlined above are essential for ensuring the accuracy of your STP finalisation, we understand the process can be confusing and overwhelming. At Causbrooks, we're here to provide expert guidance and assistance tailored to your specific needs. If you find the finalisation process challenging, reach out to us for personalised support.

Book a consultation with us today.

Common mistakes to avoid

 Common mistakes in STP finalisation include:

• Finalising for the incorrect financial year, especially when the declaration is lodged after 30 June.
• Not submitting a finalisation declaration for all employees you've paid and reported through STP during the financial year, including those who may have only worked for part of the year.
• Not taking necessary steps when changing payroll software or Payroll IDs during the financial year, which can lead to overstated income statements for your employees.
• Not maintaining continuity of year-to-date amounts from your STP Phase 1 reporting.
• Not making necessary amendments after you have submitted a finalisation declaration if you identify a mistake. It's important to lodge the amendment as soon as possible and inform your employees about the correction

STP software options for small business owners

There is a wide range of Single Touch Payroll (STP) software solutions available for small business owners. The right solution for you will depend on your business needs and circumstances. If you currently use payroll software, you should check if it's STP-enabled. If it's not, or if you don't currently use payroll software, you should look for a suitable product. If you have 1–4 employees and you do not need payroll software, you can use an alternative solution. You can find STP software solutions on the STP product register on the ATO website. It's also a good idea to talk to your registered tax or BAS agent to find out which payroll software product would best suit your business needs.

Most common STP software options available

• Xero
• MYOB
• QuickBooks
• Reckon
• Sage MicrOpay

Pros and cons of these softwares

 Each of these software solutions has its own strengths and weaknesses. Here's a brief overview:

1. Xero

Pros: Xero is known for its user-friendly interface, features, and strong integration with other business apps. It offers unlimited payroll processing and automatic superannuation payments.

Cons: Xero can be more expensive than some other options. Some users find its reporting features less comprehensive than they'd like.

2. MYOB

Pros: MYOB offers a comprehensive range of features, including payroll, invoicing, and inventory management. It's a well-established brand in Australia with strong customer support.

Cons: Some users find MYOB's interface less intuitive than competitors. It can also be more expensive, especially for businesses with many employees.

3. QuickBooks Online

Pros: QuickBooks Online offers a wide range of features and strong integration with other apps. It's generally more affordable than Xero and MYOB

Cons: Some users find QuickBooks Online's payroll features less comprehensive than competitors. Its customer support also receives mixed reviews.

4. Reckon

Pros: Reckon is a cost-effective solution with a range of features suitable for small businesses. It also offers unlimited payroll processing.

Cons: Some users find Reckon's interface less modern and intuitive than competitors. It also has fewer integrations with other business apps.

5. Sage MicrOpay

Pros: Sage MicrOpay is a robust payroll solution that can handle complex payroll requirements. It's well-suited to larger businesses or those with complex payroll needs.

Cons: Sage MicrOpay can be overkill for very small businesses. It's also more expensive than some other options, and some users find its interface less intuitive.

Factors to consider when choosing STP software

When choosing STP software, consider the following factors:

Business size

Some software solutions are better suited to small businesses, while others are designed for larger enterprises. Consider the number of employees you have and the complexity of your payroll needs.

Features

Look for software that offers the features you need, such as payroll processing, superannuation payments, and reporting capabilities. Some software also offers additional features like invoicing, inventory management, and integration with other business apps.

Ease of use

The software should be user-friendly and intuitive. You don't want to spend unnecessary time learning how to use complex software.

Cost

Consider your budget. The cost of STP software can vary widely, so find a solution that offers the features you need at a price you can afford.

Support

Good customer support is crucial. Look for software that offers strong customer support, including online resources, live chat, and phone support.

Compliance

The software should be compliant with Australian tax laws and regulations, including STP reporting requirements.

Integration

If you use other business software, consider how well the STP software will integrate with these systems.

Reviews and recommendations

Check out reviews and get recommendations from other businesses similar to yours. Remember, the best STP software for your business will depend on your specific needs and circumstances. 

Impact of STP finalisation on tax return lodgement

Single Touch Payroll (STP) finalisation has a significant impact on the process of lodging tax returns. One of the main benefits is it simplifies the process by pre-filling your income information into your tax return. This means you don't have to manually enter this information, which can save you time and reduce the risk of errors. However, it's still important to check the pre-filled information against your own records to ensure it's accurate.

Another advantage of STP finalisation is it allows the Australian Taxation Office (ATO) to process your tax return faster. Because your employer reports your income information directly to the ATO through their payroll system, the ATO already has this information when you lodge your tax return. This can speed up the processing of your return and any refund you may be entitled to.

STP finalisation also means you no longer receive a payment summary (or group certificate) from your employer at the end of the financial year. Instead, your income statement is available in ATO online services through myGov. It's important to wait until your income statement is marked as 'Tax ready' before you lodge your tax return. This indicates your employer has finalised your STP data and it's ready for you to use in your tax return.

Finally, STP finalisation makes your income statement accessible at any time through myGov. This means you can lodge your tax return at your convenience, rather than having to wait for your employer to provide you with a payment summary. However, it's still your responsibility to ensure all income is declared on your tax return, so you should still check the pre-filled information is correct.

Penalties for non-compliance

There are penalties for non-compliance in STP finalisation. The Australian Taxation Office (ATO) has established penalties for employers who fail to meet the requirements of STP finalisation. These penalties may vary depending on the specific circumstances, but can include fines for late reporting, failure to comply with notices, and providing false or misleading statements. It's crucial for businesses to adhere to STP guidelines and timelines to avoid these penalties.