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What smaller businesses need to know about new tax reporting requirements

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Businesses that employ less than 20 people will now be required to use payroll software to report to the tax office in real time.

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From 1 July, businesses that employ less than 20 people will be required to make the switch to the ATO’s Single Touch Payroll Reporting (STPR) requirements.

Already in place for those that employ 20 or more staff, the introduction of STPR is intended to streamline the way employers report some tax and superannuation information to the ATO.

Ordinary Time Earnings, salary and wages, allowances, deductions, superannuation and Pay-As-You-Go (‘PAYG’) withholding are amongst the information required to be reported and available to the Commissioner in ‘real time’ when payroll is processed.

To comply with PAYG withholding obligations, larger employers were required to acquire SBR-enabled software. This would mean a big change for many small and micro-businesses, particularly those that are using out-of-date payroll software or still operate manually.

The good news for these businesses is that the ATO won’t force smaller employers to purchase payroll software if they don’t currently use it and have provided a list of no-cost and low-cost solutions on their website.

These solutions were provided after the ATO asked accounting software companies for products which cost less than $10 per month, take minutes to complete each pay period and require no maintenance on the part of the employer.

BDO Business Services Partner Steve Fimmano says that despite this relief on the need to purchase software the requirements for small business owners are now essentially the same as their larger counterparts.

“Business can treat this as an opportunity for a broader review of their payroll processes to ensure the treatment of various types of payments and remuneration is correct, before the mandatory change to STPR on July 1,” says Fimmano.

He says that although companies have been given a ‘grace period’ of up to 12 months before penalties for non-compliant businesses are applied, business owners should be reviewing their processes now.

“It’s a chance to have detailed conversations with your accountant and/or software provider about your needs and compliance requirements. Ensure you review and monitor your HR processes to ensure employees are being treated fairly and paid correctly,” Fimmano says.

This article is sponsored by BDO Adelaide.

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