‘What’s STP?’: Digital laggards still unprepared for payroll change, unaware they can defer

Less than a week from the soft deadline on Single Touch Payroll (STP) reporting for small businesses, new research has revealed employers are still struggling to come to grips with the changes.

Digital accounting platform MYOB has today released a report surveying 520 small business owners about the looming STP deadline.

The research reveals just over half (51%) of businesses with 2-4 employers believe they’re very likely to become STP compliant before 30 September, while only 28% of businesses with one worker said the same.

Businesses with less than 19 workers are technically required to be reporting under STP from 1 July, but the ATO has created a three-month buffer zone before it starts asking questions.

Micro-employers without an existing digital payroll solution will be able to apply for quarterly reporting for the first two years of the scheme, but a whopping 76% of micro employers said they were unaware deferrals even existed.

David Weickhardt, MYOB’s general manager of product, says STP is a “bigger habit change” for businesses reporting manually.

“The results of the research were not surprising, considering how time-poor we know small business operators are, particularly micro business owners,” he says.

Many firms don’t even know what STP is

While the number of small employers reporting under STP has been increasing in recent weeks the ATO still faces the prospect of getting hundreds of thousands of micro employers who don’t use digital payroll into the system.

The tax office’s outreach efforts have been national, but now resigned STP program lead John Shepherd conceded earlier this month awareness in remote areas was still “very, very low”.

MYOB’s latest research found less than half (41%) of businesses with between two-and-four employees hadn’t even heard of STP, while only 17% of businesses with one worker were aware of the scheme.

The findings echo similar data sets released by others in recent weeks as the ATO scrambles to make up for lost time in getting the message out to employers.

The machinations of Canberra have put a spanner in the works for the ATO in recent months. Parliament didn’t pass laws to extend STP to small employers until February, which limited early outreach.

Then, after the Bill was passed, the timing of the federal election placed the ATO into caretaker mode, delaying the rollout of some nationwide marketing spend until early June.

Meanwhile, faced with an influx of new data, the ATO itself is still learning about the best way to administer and enforce the scheme, prompting a light touch on compliance until 1 July 2019.

Micro employers, particularly those with just one worker, which don’t already have digital payroll are the biggest problem group facing the tax office though.

More than a third (43%) of MYOB survey respondents with between 2-4 workers said they aren’t using digital payroll, while three quarters (75%) of businesses with one worker aren’t.

The ATO confirmed earlier this year there were at least 300,000 micro employers not using digital payroll.

Almost half (56%) of all businesses surveyed said they’re still calculating worker pay manually, while 40% said they use excel or something similar.

Some relief will come in the form of plans for closely held payees, as they will be exempt from reporting until the 2019-20 financial year, but accounting professionals say they’re worried the buck is being passed.

“It’s come home to roost”

Tony Greco, general manager of technical policy for the Institute of Public Accountants says his members feel quarterly deferrals will see them caught in between a rock and a hard place.

Greco says micro employers were identified as a significant issue during pilot studies for STP and small business.

“It’s come home to roost,” Greco tells SmartCompany.

“You’ve got all these micro employers not on digital platforms who will shift the problem to an intermediary [accounting professionals].

“Our members are saying they’ll have to spend some money and find a solution to report quarterly for clients.”

Only registered tax and BAS agents can sign up micro employers for quarterly reporting, which sees agents report on their behalf every three months rather than each time payroll is run.

SmartCompany asked the ATO how many micro employers have applied for quarterly reporting so far but was not told.

Past the point of no return

The tax office has made efforts to ensure low cost/no cost digital payroll options are available for micro employers but accounting professionals have stressed many business owners struggle with software.

CPA Australia’s head of external affairs Paul Drum has called for a “critical examination” of the STP rollout for employers with less than 10 workers, including whether they should be included in the scheme in the first place.

But others say it’s unlikely the government will slow the ball now, particularly as its already parroting plans for an expansion of the regime to enable Centrelink to collect more data.

“The government has raced ahead … ideally they want everyone on a digital platform,” Greco says.

David McKellar of Allied Business Accountants says deferrals for micro employers and an exemption for closely held payees should cover the “vast majority” of employers who might not be ready for STP yet.

“Our advice to clients is that despite the deferrals being available, they should start STP reporting from 1 July,” he tells SmartCompany.

“If using a suitable system, STP is a relatively small administrative task, and taking a deferral is only putting off the inevitable.”

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