Smaller businesses with no electronic payroll systems could be forced to reduce the frequency at which they pay their staff if a high-profile reporting change is implemented by the ATO.
Tony Greco, head of policy at the Institute of Public Accountants, told My Business that while the introduction of Single Touch Payroll (STP) reporting is causing some problems for larger businesses in updating their digital systems, microbusinesses that rely on back-of-envelope calculations will be forced to make drastic changes should STP be rolled out across all businesses, as is expected.
Mr Greco noted that the law is currently before parliament to extend STP to businesses with less than 20 employees – some 700,000 employers – which would standardise reporting of employee financial information for employers of all size.
This is likely to come into effect, he suggested, as a system where some businesses are bound by it and others are not would “make the whole exercise problematic”.
But he expressed concern for the impacts this rollout would have on small and microbusinesses.
“We’re very concerned about the micros – entities with less than five people, especially those that are not on a digital platform,” Mr Greco said.
“You’re asking them to go on a digital platform or have an intermediary step in to do that for them, which introduces cost.”
Higher frequency means higher costs
The problem with the latter option — an intermediary — is an increased frequency with which an accountant or bookkeeper is sought, substantially increasing operating costs.
“Small business operators are time-poor, and you’re imposing another compliance obligation on them to remit information on a pay cycle basis,” Mr Greco said.
He used the example of a butcher with two or three staff paid weekly, who does basic bookkeeping “on the back of an envelope” and remits that to their bookkeeper at the end of every quarter when BAS becomes due.
“What you’re asking now is for that information, on the back of that envelope, to go into a computer program so that it can be sent digitally to the tax office on a payroll cycle basis… that’s 52 annual transmissions of data to big brother, the ATO.”
One obvious solution would simply be for employers to pay their staff less frequently, to minimise the number of times information is sent to the Australian Taxation Office (ATO) through their accountant or bookkeeper.
“I don’t think that’s unexpected,” he said, noting many employers pay weekly or fortnightly for convenience and to aid cash flows.
“The easiest thing to do would be to pay in the middle of the month, so you’re pre-paying two weeks’ worth and you’re in arrears two weeks’ worth.
“But you’ve got to wean employees off that frequency.”
Start preparations now
Mr Greco urged all employers to start thinking about and preparing for STP now, rather than stick their head into the sand until it becomes a reality.
“It’s part of the government’s agenda, so it will be silly to think it’s not going to happen. Both [parties] support it,” he said.
“The issue is how are they going to help a small business with the compliance obligation it imposes on them. At the end of the day, it is going to cost them money… to go out there and buy a piece of software and then to be able to run it and operate it themselves.”
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.