ATO resolves declaration dilemma for STP
Single Touch Payroll (STP) has been a smash hit, but there was one lingering concern that has now been addressed.
In case you’ve been out of the loop, STP means that businesses are now able to lodge payroll reports with the ATO every time they complete a pay run – instead of creating one giant report at the end of each financial year.
The aim was to improve efficiency and transparency in payroll reporting, but there was a problem.
Under the initial framework, every STP report was treated as the submission of an “approved form”, meaning a whole new wave of paperwork would have been unleashed.
According to Matthew Addison, executive director at the Institute of Certified Bookkeepers (ICB), burying payroll officers with STP was a very real danger.
“The ATO operates on a system of approved forms, which have a very specific definition in the language of tax legislation,” said Addison.
In this system, an individual’s tax return, BAS statement or STP report are all types of approved forms – essentially, these are documents containing specific information and containing a declaration by the person(s) as required for that type of form.
“This system was designed so that once the format of an approved form has been decided, it’s not easy for the government to change the form without going through due process, thereby bringing certainty to what is in these forms,” said Addison.
So every single STP report lodged with the ATO, whether filed daily, weekly, fortnightly or monthly would theoretically need a signed declaration from both the employer and their agent.
You can imagine the amount of time filling out these declarations could take up.
Luckily, several industry bodies including the ICB got together with the ATO to come up with a solution.
“We have always supported the idea of having professional intermediaries holding engagement letters, which essentially act a as a memorandum of understanding between an employer and their agent in terms of the type of work being done and what level of fees the employer should expect,” said Addison.
“That’s already standard and professional practice in the industry, but what we have now is a situation whereby the ATO is enabling tax agents to be authorised upfront when doing STP reporting via these letters.”
In short, the ATO is now allowing a more practical approach to declarations in that a single, upfront engagement letter can take the place of filing a new declaration with every pay run processed.