06 Mar 1515 On Single Touch Payroll and SBR enabled software – the ATO responds
In 2015 TAXVINE No 5 (20 February 2015), MEMBER 25 wrote:
“Under Single Touch Payroll, it is proposed that employers be required to electronically report payroll and super information to the ATO when employees are paid, using SBR enabled software.
How will this proposal be implemented for the thousands of small business employers who don’t use any ‘SBR enabled software’? Lots of small businesses happily keep track of simple payroll amounts in a spreadsheet, or on the back of an old envelope.
Perhaps this ever increasing compliance burden on small business will require more forms for the ATO to process? Or worse, employers will need to do all the extra work and logon to some ATO web page and enter a bunch of payroll details.
Or maybe the ATO plans to release some SBR enabled Payroll Software for small employers to use?
Too many questions. Too many unknowns. Might be Single Touch for the ATO, BUT will be very many touches for everybody else.
Is The Tax Institute having any meaningful input to this rather strange proposal?”
TAX COUNSEL THILINI WICKRAMASURIYA COMMENTS: The ATO has recently released a discussion paper on their proposal to use “Single Touch Payroll”. The discussion paper can be accessed here. Please send your comments through to Tax Policy by Friday 27 February 2015 so that we can include them in The Tax Institute’s submission.
In 2015 TAXVINE No 6 (27 February 2015) MEMBER 33 wrote:
“Really appreciate the comments from Tax Counsel Thilini Wickramasuriya about this new proposal from the ATO.
This will be a very backward and retrograde step for the ATO, it will not really stop any red tape and is ill thought out.
Where is the small business person going to get the funds to pay all of the payments to the ATO in the one time?
Time that the whole truth is told to the public and The Tax Institute members, there is no such thing as Standard Business Reporting (SBR) enabled software and will not be in the future. What is really being done is that the ATO are building a new way of sending data to them which they are erroneously calling SBR, this is definitely not SBR in the true sense of the words. This is only a generic name for a delivery mechanism.
There is no way any small business would be silly enough to provide to the ATO all of their raw data in the true way that the real SBR is supposed to be designed.
As stated earlier the biggest problem is the additional cost placed on small business and the increase in red tape to keep the ATO happy.
Really not good enough at all.”
In 2015 TAXVINE No 6 (27 February 2015) MEMBER 34 wrote:
“This is really off the planet!
What has not been done is clearly explain that no small business has the cash reserves to be paying wages, PAYG tax and SGC super all at the same time just to keep the ATO happy.
Many small businesses currently use a small payroll program and if forced to go this way then I will not use one at all.
This is a Utopia looking through rose coloured glasses!”
THE ATO NOW RESPONDS TO ALL OF THE ABOVE COMMENTS ON SINGLE TOUCH PAYROLL AND SBR ENABLED SOFTWARE
“Thank you for your comments in relation to Single Touch Payroll.
We believe that the professions have a strong role to play in improving Australian productivity. This challenge will require many of us to step outside our comfort zone and to imagine and to build a better digital environment for Australian businesses.
If we get it right, we will improve business productivity and business survivability. We will also provide a fairer outcome for compliant businesses and we will provide a strong foundation that can be leveraged to reform other areas of the economy (eg, create opportunities for welfare reform). During this journey we will need to learn from other jurisdictions and other digital projects.
The ATO and Treasury will continue to conduct consultation with a broad range of stakeholders on the implementation arrangements to support employers transitioning to Single Touch Payroll. Consultation is also covering whether to shift payment of Pay as You Go Withholding (PAYGW) and Superannuation Guarantee to the same day employees are paid.
We agree that Single Touch Payroll is dependent on development and delivery of appropriate software and standards. We are working with software developers and payroll providers to make sure that any implementation timeframes are realistic. We also agree that small businesses must have access to free or affordable entry level software products. We are looking at how the United Kingdom ensured access to such products during their implementation of a real time payroll reporting regime.
We are also very conscious that Single Touch Payroll must leverage data that would normally be stored/used or generated by a payroll process. This means we can leverage a ‘natural event’ to fulfil reporting obligations automatically. Our workshops with employers demonstrated significant opportunities to streamline and reduce their reporting (and payment/reconciliation) burdens.
We know that we need to think carefully about the cashflow impacts of the payment component. We are working through case studies and mitigation options that would be available if real time payments were implemented. This would include transition strategies as well as the ability for businesses to enter into short term relief arrangements (informed by risk and compliance behaviours).
It is worth noting that the current lag times between the PAYGW and Superannuation liabilities being incurred and the obligation payment date (particularly for quarterly obligations) are longer in Australia than almost every other developed nation.
This long lag time contributes to cashflow ‘death spirals’ (eg, businesses that have not progressively provisioned for their quarterly obligations are likely to exhibit non lodgement and/or non payment behaviour which jeopardises their longevity). Unfortunately they are also risking the PAYGW and their employees’ superannuation whilst competing unfairly with compliant businesses that lodge and pay on time.
Interestingly, the commercial world recognises that the uncontrolled compounding and ageing of debt disadvantages everyone in the long run (including creditors, debtors and other interdependent businesses or clients).
We are considering how a Single Touch Payroll solution could be phased in. We know from our own history of digital projects and from overseas jurisdictions that long winded ‘opt in’ transition strategies are doomed to fail. For example, regardless of the fact that electronic refunds were easier, more secure and faster than cheques, we spent over a decade reaching 70% voluntary adoption rates for electronic refunds. When we mandated electronic refunds, we jumped to almost 99% adoption in a matter of months. We also know, from experience and from developer feedback, that developers will build software products quickly if we set clear timeframes for implementation and transition dates.
A similar payroll reporting arrangement introduced in the United Kingdom in 2013 resulted in 96% of employers reporting more than 99% of employee payroll events in real time. Other jurisdictions around the world are moving in similar directions, with some even mandating the ‘manual’ collection of all payroll data (equivalent to a full payment summary per employees) every payroll or lodgement event (whereas we are looking at automated options).
During the consultation process, we are collecting input on the support strategies that will be required for all stakeholders. We also understand that there will be extreme examples that we will need to cater for (eg. remote employers with no digital access). The extreme examples should never prevent us from designing and implementing a system that can cater for the majority.
We are seeing many professionals and developers offering some excellent insight as to how we can improve the Single Touch Payroll solution and the strategies that would be required to deliver a smooth implementation. We are particularly thankful for their contributions.”