From 1 July, all small businesses employing fewer than 20 staff in will face sweeping changes in the way they interact with the Australian Tax Office. Up to half of those affected may be unaware of the changes.
Restaurant owner Nicole Ha is a mother of three girls aged 14-24.
The eldest two help to run the family’s busy Vietnamese restaurant in St Leonards, Sydney.
Ms Ha bought the business in 2010 with the financial support of her relatives, and regularly uses Microsoft Excel to process wages and tax for her 10 employees.
But from Monday she - and thousands of other small business owners in Australia - will need to switch to the new Single Touch Payroll (STP) system, to comply with new tax reporting laws introduced by the ATO and described as a “once-in-a-generation change”.
“The new STP is very confusing,” Ms Ha told SBS’s Small Business Secrets during a break in lunch service at the restaurant.
“We haven’t even started yet, we are just not prepared. We have a busy schedule and it’s hard to get the time to change over.”
For businesses even smaller than Ms Ha’s (around 400,000 so-called ‘micro-businesses’ which employ fewer than five staff) almost one quarter get by without using any software at all.
But the changes mean that from Monday they will be required to use STP-enabled software to report their weekly or fortnightly pay run online.
“This is a big change and some have said the biggest change since the GST,” the ATO’s assistant commissioner John Shepherd said.
“It does revolutionise payroll reporting.”
The ATO promises to rollout resources for those who don’t speak English as a first language and says owner-operators who need advice in-language can call the translating and interpreting service on 13 14 50.
“It’s very hard for people from migrant backgrounds,” Ms Ha said.
“I find it very hard to understand, personally.”
Mr Shepherd said: “a big proportion of small business owners do not have English as a first language and we see it as a priority to be able to translate our materials and make them available in different languages and services via a call centre.”
Half of business owners unaware of changes
Businesses with more than 20 staff converted to the new tax reporting system in 2018.
Software expert Simon Foster explained: “The single touch piece (in STP) is that wages and tax information is being passed to the ATO every time you do a pay run. So employees can go online and see that information in real time.”
“It should make businesses more efficient and save time on red tape. However, those without cloud accounting will have to get new systems and they’ll have to get them soon.”
Jonathan Herrman from North Sydney Innovation network, which supports start-ups, said the new system also tracks superannuation and is expected to reduce the number of small businesses defaulting on or delaying staff super payments.
“It puts those businesses on notice that aren’t paying super or are paying wages in an unusual way that wages are watched every single pay run,” he said.
But the Small Business Ombudsman Kate Carnell understands many small business owner-operators are unprepared for the changes coming into effect next month.
“We believe that as many as 50 per cent of small business owners have no idea that this is happening, so the message needs to get out there,” she said.
Single Touch Payroll software is available for as little as $10, some is even free, from major suppliers via the ATO web site.
With a rising fear of cyber hacking, the vendors were required to embed the latest cybersecurity measures in the STP software, to protect sensitive data.
Small businesses have until 30 September to change their systems over, and those in remote areas with limited internet can apply for an extension.
But the ATO advises small business owners not to wait until the deadline.
“The call to arms is not to put it off altogether but to start making plans, and to communicate with us either directly or through your agent,” Mr Shepherd said.
Ms Ha said she will have to get around to it, when her work allowed.
“Maybe next week we will have to do something, but we have until October, right?”
More information about Single Touch Payroll (STP) can be found here.