Biggest change since GST: Electronic payroll system sparks concerns

Businesses are scrambling to digitise their wage processing as the Tax Office rolls out the Single Touch Payroll system.

In what is being described as the most significant legislative change "since GST", the requirement to use Single Touch Payroll came into force for businesses with 20 or more employees from 1 July this year. Smaller businesses are likely to have until July 1, 2019 to comply.

The electronic system automatically reports payroll information direct to the ATO every time employees are paid with around 40,000 businesses already using Single Touch Payroll.

ATO commissioner Chris Jordan at the Vodafone National Small Business Summit.

Photo: Peter Braig

Australian Small Business and Family Enterprise Ombudsman Kate Carnell said small businesses are concerned about the compliance costs associated with the new system.

At the Vodafone National Small Business Summit last week, Ms Carnell asked Tax Commissioner Chris Jordan about the implications for small business.

"Will they have to have an electronic payroll and software system in place that they don’t have now and don't believe they need?," she said. "There are an awful lot of businesses that really don’t justify an electronic wages system. They have only a few employees who work the same hours all the time."

Small Business Ombudsman Kate Carnell is concerned about the implications of Single Touch Payroll for small businesses.

Photo: Peter Braig

Mr Jordan said the Tax Office was trying to work with businesses, and while all large employers were supposed to have switched to Single Touch Payroll by 1 July, not all are there yet.

Mr Jordan said the delays were not a concern, with most large businesses likely to be using the system by Christmas.

"It has allowed us to make sure the system has flowed and worked and fortunately so far it has," he said. "In the same way for next year we will work with people and understand difficulties... and try to make it as easy and understandable as it can be. Once they understand it, hopefully they will think it will not be too bad."

Trent Innes, managing director of Xero.

Photo: Jessica Hromas

Accounting software platform Xero has enabled its platform to use the Single Touch Payroll system for all its business customers with 20 or more employees.

Speaking to Fairfax Media on the sidelines of Xero's annual summit in Brisbane, managing director Trent Innes said the move to Single Touch Payroll was significant.

'Have to have'

"We haven’t really seen this level of legislative change coming down the line probably since the GST," he said. "There is a lot of work that goes into that to be ready for that."

Mr Innes said customers still have to opt in to use Single Touch Payroll.

"That is still a choice that they make," he said. "There will always be people who don't want to adopt new technology for whatever reason."

However Mr Innes said the rollout of Single Touch Payroll was part of the broader move to digitisation.

"Digital was a 'nice to have'," he said. "Whereas now we have gone to the other end of the spectrum when legislative change comes through it goes from 'nice to have' to 'have to have'."

The reporter attended Xerocon in Brisbane as a guest of Xero.

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