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Australia Expands Single Touch Payroll – Will There Be Implications for State/Territory Payroll Taxes?

By Laura Lough, Esq.
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Beginning 1 July 2019, Single Touch Payroll (STP) in Australia is being extended to small employers with 19 or less employees. This was subject to legislation, which was enacted in February. The STP expansion could lead to a focus on state and territory payroll taxes for all employers [Australian Tax Office, News Release, 8 March 2019].

STP began last year
STP went into effect 1 July 2018 for large employers (20 or more employees). It is a government initiative requiring employers to report all payments, pay-as-you-go (PAYG) tax, and superannuation information to the Australian Tax Office (ATO) at the same time the employees are paid from their payroll solution. Additionally, there is a requirement to provide new employee details to the ATO before employees are paid. See the GPMI news release, Single Touch Payroll in Australia Coming July 2018.

There will be a three-month transition period for small employers. They can start STP reporting any time from 1 July – 30 September. “This is a gradual transition, and we are providing flexible options,” says the ATO. “If you’re an employer with four or less employees you will have additional options.”

State and territory payroll taxes
Interestingly, the STP change for small employers could lead to a focus on state and territory payroll taxes for all employers. These taxes are assessed on employee wages when the total bill of an employer (or group of employers) exceeds a threshold amount. It is payable in the Australian state or territory where the services were performed. Each state or territory has a different tax rate and threshold as well as registration process. Payroll taxes are paid to the state and territory revenue offices (on a monthly, quarterly, or annual basis).

There is a perception that many small businesses are simply not aware of state and territory payroll taxes. Even for large employers in Australia, payroll taxes can be complicated and may require payroll departments to work closely with their accounting and tax groups to make sure they are in compliance.