What Does Single Touch Payroll Mean for Small Businesses?

If you’re a small business you know that Single Touch Payroll (or STP) is the new way for businesses to report tax and super information to the ATO.

As of 1 July 2019, all small business employers with 4 – 19 employees are now required to report through STP as well as employers with 20 or more employees who are already using this system.

This means that each pay run must be electronically filed with the ATO. Previously, you didn’t have to report wages and withholding until annual PAYG payment summaries were submitted. So this is a big change.

What Does This Mean For You?

If you’re unsure of why this change is happening in the ATO, you’re not alone. While the ATO tells us that STP is simply to make reporting easier. Regular reporting means that annual PAYG payment summaries are no longer required.

So in a nutshell, STP means that the ATO now knows, on a live and up-to-date basis, whether an employer is making payments to employees compliantly.

The ATO is also changing deductibility rules for non-compliant payments (which they can now see in real-time).

Businesses will only be able to claim deductions for payments that are made to workers when the employer has complied with the PAYG withholding and other tax reporting obligations for that payment.

This presents a problem to many small businesses as when you’re running at a smaller capacity, keeping 100% compliant all the time can fall by the wayside.  

So if you’re only doing your super and tax deductible once a month, or even once a quarter, it’s time to rethink the way you work – and fast!

What Can Get You In Trouble With STP

There are a lot of examples as to what small business owners are doing which has been perfectly fine in the past, but can now land you in hot water. These are just some examples, but tend to be the most common.

  • Paying yourself a one-off directors fee at the end of the year to reduce a loan account to prevent Division 7A issues.
  • Not withholding any tax at the required rates.
  • Not paying super on the Director’s Fee, which is a breach of Super Guarantee Charge obligations.

Now that the ATO will know about the above on a live basis, as the directors Fees are not classified as wages and thus must be reported via STP. If taxes are not withheld correctly then the income is still taxable for the director individually, but the expense is not deductible for the company – so it’s a double whammy!

Not to mention that the ATO will now know about that super issue straight away.

  • Not paying super on time – if super is paid late it becomes non-deductible (this means it must be paid within 28 days from the end of the quarter). But the Super Fund will still pay standard superfund tax rates on the funds, generally 15% but not always depending on members taxable income)

What Happens If You Do Get it Wrong

Getting your STP reporting wrong can mean that you’ll have to answer to the ATO and face potential fines and audits.

  • Because reporting is now live and completely visible, you WILL be caught.
  • You will lose deductibility in the company of the wage and super. Based on the average Director’s fee of $80k+Super means an average loss of $99k*30% lost deduction. So you could lose $26,500 cash to the ATO
  • The individual will still need to pay standard tax rates on income and superfund on super earnings despite the company losing deductions

Getting onto the STP can be intimidating – particularly when you focus on the money that you could potentially lose if you get something wrong. But it doesn’t have to be a warzone. To give the ATO some credit, they are trying to make it easy and it can even be integrated with certain cloud-based accounting systems like Xero! So once you’ve got STP set up and you get in the rhythm it’ll become second nature.

But you have to have a thorough understanding of the changes to make sure you’re getting all that you can out of the system and not making any mistakes.

If you’re concerned that your small business might need some help running Single Touch Payroll, or you just want someone to double check what you have setup, call Bartley Partners today on (08) 8388 1033 or get in touch online to learn how we can help you.

5 Reasons to Hire an Accountant for Your Business

If you’ve started your own business, you know the highs and lows already. The great feeling from getting more clients, doing the work you really want to be doing and being your own boss. But there’s always another side to that coin. Late nights, stress, financial insecurities. But the thing that’s often not talked about is all the administration work that needs to be done and seemingly never ends.

Working on the books for your business is an important, and often time-consuming, job that needs to be done for legal and taxation purposes. And it needs to be done correctly or you could be up for financial penalties and severe audits.

There are two options for this work – do it yourself or hire a pro. When doing it yourself you’re not paying for a professional, but you are paying in time. And is it worth it?

We’ll explore the top 5 reasons that hiring a business accountant is the right choice for your business.

 

1. It Saves You Time

Just because you’re able to do your own accounting and financial reporting doesn’t mean that it’s the best use of your time. If it takes you 10 hours a month to manage your books and you charge yourself out to clients at an hourly rate of $150 – you’re actually losing $18,000 in revenue a year. Is that an expense that you’re willing to pay for?

Hiring an accountant means that you’ll be freeing yourself up to focus on what you do best and can develop the business to generate more revenue. And a business accountant will rarely cost you $18,000 a year!

 

2. Reduce Your Risk

Working on your own accounts, at 11pm after a full day of work is not the best way to go about things. Mistakes can be made when you’re running on empty. And when it comes to accounting and tax returns, a mistake can really cost you!

At Bartley Partners, it’s our job as business accountants to know not only your business, but the current government and ATO regulations. We provide a service that will always be compliant with the most current laws and regulations.  So you can rest assured that everything submitted is correct and on time. Which means that at 11pm you can go to bed and sleep easy know you’ve made the right choice for your business.

 

3. Save Money

It’s not just the job of a business accountant to simply follow a formula and submit your tax returns. One of the highs of our job is finding a way to save you money, whether it’s through tax claims, business structure or cash flow management.

Keeping more money in your pocket is what we live for.

At Bartley Partners, we base our success on yours. If we can help your business grow, build revenue and operate more efficiently, we count that as a win. If we’re simply submitting paperwork to the ATO without a deeper look…well that’s something that we just don’t do.

We can help you grow your revenue and profits by being smarter, not by working harder.

 

4. Find a Business Structure that Works

There are many business structures that you can follow – and finding the right one can be mean that you’re paying for what you don’t need or even stifling your growth.

When you work with the experienced business accountants and financial advisers at Bartley Partners, we take it upon ourselves to learn the ins and outs of your business and future goals. Which means we can set you on the right path as soon as possible to help you get there.

 

5. Growth Strategy & Management

Growing your business to more staff, more clients and more offerings doesn’t always mean more profits. There are costs associated with making your business bigger. So when it’s time to grow, you need to know the best way to go about it to remain profitable.

We specialise in growth strategies for Adelaide businesses, and know how hard it can be for a business owner to be able to step back and look at their situation from a clear perspective. We love working closely with our clients to identify when it’s time to grow and the best way to get there.

Because your business accountant knows your books so well, it’s easy for us to make call on what’s achievable and identify the best way for you to move forward.

Are you ready to save time, money and grow your profits without having to put in those extra hours? We’re ready! Call Bartley Partners today on (08) 8388 1033 or get in touch online to learn how we can help you.