Is your small business ready for Single Touch Payroll?

For employers with 19 or fewer employees, single touch payroll (STP) legislation will be coming into effect on the 1st of July 2019. Are you ready? Because it’s important to start preparing now.

You need to know what Single Touch Payroll is, what the changes mean for your business and who it affects. And more importantly, you need to know what to do to prepare, so that you will be compliant.

What is Single Touch Payroll?

For employers with 20 or more employees, you will already be familiar with STP, but if you are unaware, STP is the mechanism for sending tax and super information to the ATO directly from your payroll or accounting software every time you pay your employees. The legislation was passed in February this year to extend this to employers with 19 or fewer employees.

How to prepare your small business for STP and ensure compliance

Most popular payroll software companies will have the correct facilities ready to go, such as Xero and MYOB. We will have spoken to many of our clients already about STP, however, if you are unsure, talk to us.

There are a few things to be aware of you as you get ready to use STP reporting.

1. Check your software – you may need a software update or additional step added to your process
2. Ensure you have factored STP into your payroll process
3. Ensure your payroll compliance is up-to-date generally, including employee benefit, wage and super entitlements and maintaining accurate records

The first year of using STP reporting is a transition year and there will be assistance from the ATO. That means penalties for errors will not generally apply.

If you don’t think you will be ready by the 1st of July, you can apply for a deferral through the ATO. The ATO gives a list of possible reasons for deferring, including lack of internet coverage, or if further development of software is needed.

If you haven't already done so, talk to us about doing your preparation now to ensure you are ready by the 1st of July.

Do you have a home office?

If you have a home office for your business, you should be able to claim some of the costs involved in maintaining, owning and using your home.

It’s important to be aware of what you can and can’t claim, and the record-keeping involved in making a claim.

How does it work?

In order to claim, the space you use must be used primarily for your business.

This doesn’t mean setting up at the kitchen table from time to time, it means having a dedicated space that you work from.

If you are selling online and storing stock, you may also be using other spaces in your house for storage or stock maintenance. Or, if you are making or creating products, you may be using other areas like your kitchen or workshop.

Costs that you might be able to claim include:

• home office equipment
• repairs to the home office or work-related furniture and equipment
• cleaning expenses
• any other day-to-day running expenses for your home office.

You may also be able to claim the costs of some trips in your car if these are from your home office to other locations where you are carrying out business.

The ATO has developed a calculator tool, to help you better understand what you might be able to claim. View the tool here.

Keeping track of your costs

Make sure you keep a record of all your expenses. It’s important to keep your personal and business expenses separate. Consider using online accounting software so the paperwork is kept in good order.

We can help you review your home office expenses to make sure these are included when you claim.

Talk to us, we can help.

Set your business up with the right structure

Before you start a new business it’s essential to make sure you’re choosing the right structure for the long term. 

The business structure you choose can have big implications down the track, so it’s best to set up for success from the beginning.

The structure of your new business has repercussions in terms of tax, costs and the protection of your assets. When you decide on what structure you’ll use, keep in mind your future plans, because this may impact your decision.

There are three main structures you could consider.

Sole Trader

If you’re operating on your own, this may seem an obvious choice. It’s a quick one to set up and incurs minimal costs. Bear in mind that a sole trading business can be trickier to sell, and you are taking on greater personal risk in establishing the business. It may be worth looking into how you can protect your personal assets, should anything go wrong.

Partnership

If you’re working with a partner, you could consider this option. It lets you share the load, along with the costs of getting a business established. You’re also sharing the risk and potential liabilities.

Company

Setting up a company means more admin and higher costs to get going. You’ll become a ‘director’ as the person who runs the company, and a ‘shareholder’ as a part-owner. Companies have additional reporting duties, but you assume less personal risk. Also, the clear structure and reporting involved, may set you up for an easier sale when the time comes.

You could also consider setting up a trust, but as this is a relatively expensive and complex undertaking, it’s less likely you’ll go this way initially. You can change the structure as your business develops, but it’s important to consult with your accountant, lawyer or advisor as you go.

Before Deciding

Before deciding, think ahead to the future you want for your business. Ask yourself:

How am I hoping to grow the business? 

If you plan to bring on additional people to run the business alongside you, a company or partnership arrangement may suit.

When do I want to sell the business? 

Again, while selling any kind of business is possible, the clarity provided by a company may be an advantage and make your business more attractive to a buyer.

How sure am I that this business will succeed? 

It may be that you are setting out to prove a concept or explore a business idea. If this is the case, you may not look to incur too many costs up-front, and a sole-trader or partnership model may appeal.

Whatever you decide, make sure you understand the tax implications. Talk to us before setting out on your new venture.