Single Touch Payroll explained: What if my SME clients have outstanding SG?
Amanda Gascoigne explains how to play your Single Touch Payroll cards right when it comes to SME clients with outstanding superannuation guarantee (SG) contributions.
A one-size-fits-all rollout of Single Touch Payroll (STP) for SME clients is a game accountants probably shouldn’t be playing.
You may be lucky and come up trumps with such an approach, but I wouldn’t be willing to bet my practice on the whims of Lady Luck.
My preferred approach, and one that has been working well with the accounting practices I coach and mentor, is to invest the time at the outset and come up with a game plan and appropriate strategy that is going to win for each of the different segments of your client base.
Let’s say I’m the dealer and I’m about to engage in a bit of ‘table talk’ with you when it comes to your clients that have fell behind with their superannuation guarantee (SG) obligations.
Firstly, let’s look at who’s sitting at the Single Touch Payroll table.
- We have your SME client who will need to start reporting their gross wages, PAYG and SG via STP-enabled software to the ATO each time they pay their employees from 1 July 2019.
- We have your employees’ superannuation fund who are now reporting to the ATO each time they receive superannuation contributions for them.
- We have the ATO who have invested heavily in technology that will be cross referencing this information 24/7 with ‘nudge’ and ‘please explain’ messages being sent automatically to employers’ inboxes and mobile devices.
- We have employees who will have visibility of all of this information once they login to their myGov account and shortfalls or non-payment of SG could see them making an ‘all over and out’ call to their employers.
- And we have you as the accountant that has (and has for some time), visibility of non-compliance.
With these players in mind, here’s my table talk tips that are going to help you bring all of your clients with outstanding SG obligations up to date once and for all.
Tip #1 – Do they fit within your practice’s strategy?
When I work with accounting practice owners, we do a lot of work around their ‘ideal’ clients. Are the clients of yours with outstanding superannuation guarantee your ideal clients?
Perhaps you’ve spoken to them about their outstanding SG on a number of occasions and they just don’t seem to care. They think they are above the law and know plenty of others who don’t pay SG either.
Do you really want these sorts of clients? If not, use STP as your motivation to part company. I’ve got a repertoire of ‘client sacking’ letters that are professional and empathetic. The below is a sample:
Following a strategic review of xxxxx over the last month, we have opted to move in a direction that means we are no longer able to act on your behalf.
This change has been difficult for us to make as we enjoy working with all of our clients. However, our change of strategy means that our focus will be in a direction that is at odds with the way you operate your business, particularly how you meet your employer superannuation obligations.
We recommend that you seek the services of another accounting practice.
You can complete and amend so it’s consistent with the flavor of what you’d normally write.
Tip #2 – Prepare some rough calculations and options
You’ve decided the remaining clients who have outstanding SG are your ideal clients. Perhaps they’ve had a few bad hands dealt to them over the years, they are a tad embarrassed and remorseful and with your support you think you can get them back on track.
Without spending a lot of time, compile the facts that you can present to each client.
- Date of last SG contribution
- Approximate wages each year
- Approximate number or employees each year
- Calculate a rough figure of the likely unpaid SG, ATO admin fee and interest
- Calculate a rough figure of your likely fees to calculate the exact shortfall and prepare an ATO Superannuation Guarantee Charge statement for each quarter (this could be based on time or a standard fee based on the number of employees and number of quarters)
- Consider options for how they could extinguish this debt, for example: from the business, from personal sources in the form of a loan drawdown, or ATO payment arrangement
Tip #3 – Lay all the cards on the table
Now it’s time for the difficult conversation with your clients.
I would first set the scene and tell them why Single Touch Payroll is being introduced and why the ATO is wanting to interact with businesses digitally and in a more contemporary way.
- Simplified reporting – PAYG obligations are reported to the ATO at the same time employees are paid as will gross wages and SG payable – reporting will be taken care of via STP enabled payroll software – no need to provide an end of year payment summary.
- Level playing field – there will be greater assurance that businesses are meeting their employee obligations – there will be better and more real-time assistance to those employers having difficulties meeting their obligations.
- Better access to information – employees will be able to see their year-to-date tax position in their myGov account from all employers – employees will have more visibility over their SG entitlements and will be able to see when their employers are paying (or not paying) them – the ATO will know when employers are not paying SG.
- For your client – it’s their opportunity to draw a line in the sand with their outstanding obligations and free themselves of any stress that it has been causing them – it’s their impetus to change their ways and get back on track – it’s their motivation to embrace cloud accounting software so there is more real-time reporting of their numbers so they can see how they are travelling and to help them make better business decisions, for you to advise them in a more timely manner and lastly to fulfil their ATO obligations, effectively as a residual benefit.
Go through the numbers, devise a plan and subsequently issue a new engagement letter and quote in accordance with what you have discussed and agreed upon.
I would suggest that you get payment upfront or at least a payment plan that starts immediately and will be completed just prior to lodging the SG paperwork with the ATO. Think about this prior to the appointment so you can articulate your terms clearly and with conviction.
Remember, you’re going to be helping these clients free themselves from the stress they have been carrying around with them for years, you’re preventing them from receiving that dreaded ATO phone call and you’re helping them move forward so they can focus on achieving their future business and life goals.
Tip #4 – STP Ready, Set, Go!
While you and your team are crunching the SG outstanding numbers, a plan also needs to be made about ensuring your clients have STP enabled software and that they are meeting their SG obligations as and when they fall due.
I would consider striking while the iron is hot and not waiting until the official start date of 1 July 2019.
- Implement STP software or if upgrade existing software to the STP version
- Review the current payroll procedures and identify of any enhancements you can make around their processes.
- Implement and rollout STP in accordance with ATO and software guidelines
Review your clients cash flow and show them how they can use their accounting software to identify what their GST, PAYG and SG obligations are each week and encourage them to setup a new bank account and transfer these monies on a weekly basis for safekeeping or if you are concerned they may go back to their old ways, create a procedure to pay super each pay and potentially the PAYG and GST too.
Tip #5 – Show the ATO your clients’ cards
You’ve done the calculations.
You’ve been paid by the client to do these calculations.
Now it’s time to lodge each quarter’s Superannuation guarantee charge statement with the ATO.
Give the ATO a few days to process it and then contact them with the proposal you and your client devised in that initial meeting. You may also like to see if there are any penalties that you could get remitted on behalf of your client and don’t forget to mention that you have now successfully implemented single touch payroll systems and procedures and that their single touch payroll software is working like a dream.
Finally, it may also be prudent to get the elephant out of the room and speak to the employees concerned. This is where you could add real value and show further support to your client.
Take charge of the meeting or maybe send out correspondence advising that you have been working closely with their employer to tidy up some SG anomalies and oversights and going forward this won’t be a problem with the new system and software in place.