The introduction of Single Touch Payroll (STP) on 1 July 2018 has made it easier than ever for government agencies to bust businesses in breach of legislation surrounding illegal workers. Here’s what you need to know.
What is Single Touch Payroll?
STP is a government initiative designed to streamline payroll reporting, providing the ATO with much more frequent updates in terms of the PAYG information of workers.
“The previous process was the lodgment of payment summaries on an annual basis at the end of financial year. The new process is lodging on a pay-cycle basis,” says Matt Paff, Founder of tech advisory firm Value Adders.
“In order to make that as seamless as possible, the government built a technology gateway that works with payroll software members to ensure that information could be lodged, as the name suggests, with a single touch from the payroll system through to the ATO.”
Currently, only employers with 20 or more staff must make the switch to the new system, with smaller businesses given until 1 July 2019 to get STP-ready.
What does this mean for employers?
As well as giving the ATO greater transparency over employee payments, STP data will be shared with other government agencies, including the Department of Home Affairs.
Through its data-matching protocol, Home Affairs can now cross-check this information against the work rights and restrictions of visa holders to expose businesses employing, referring or contracting illegal workers.
“Historically, what Home Affairs had to do was send a Border Force officer out to your place of employment and do a full audit of your payroll in order to work out who is an active worker versus who is legally allowed to work,” Paff says.
“So effectively we’ve moved from very resource-hungry compliance enforcement through to data-based enforcement because all they need to do is run queries across their databases.”
The government expects employers to “take reasonable steps, at reasonable times” to check and re-check the work rights of employees and contractors throughout their term of employment.
The financial implications for non-compliance are huge, with business directors and officers potentially personally liable for $18,900 per person found to be in breach of their work conditions, and bodies corporate facing fines of $94,500 – even if it’s an innocent mistake.
“It’s what they call a strict liability situation, which means no fault needs to be proven and there’s no mental state that needs to be proven in terms of knowledge, negligence or recklessness,” says Mark Webster, Work Rights Legislation Expert and Founder of Acacia Immigration Australia and vSure.
“The mere fact that someone is on your payroll, they’ve worked for you and they don’t have a visa or are working in breach – that’s enough for them to put these fines on the business.”
Preparing your business for STP
Get STP-ready by taking the following steps to protect your business:
1. Update your payroll software. “Engage with your payroll technology provider or outsourcer and ensure you are ready,” Paff says. “If not, you need to lodge a deferment with the ATO.”
2. Tidy up any lax practices. As Paff puts it: “If someone isn’t comfortable with the idea of being audited on a pay-cycle-by-pay-cycle basis, it invariably means they’ve got some bad habits and invariably they should be ridding themselves of those bad habits.”
3. Keep checking your employees’ work rights. “We recommend at least checking that somebody has work rights before you employ them,” Webster says. “But it’s also important to realise that you need to keep checking because if the visa expires or changes, that can affect somebody’s work rights. For most visa types we check on a quarterly basis, but for high-risk visas, such as student visas, you might want to check once a month just to give yourself that peace of mind.