In the lead up to EOFY, amidst what has been an incredibly trying period for small businesses, you’ve likely never been busier. But while the impacts of COVID-19 continue to be felt, the requirement of year-end remains.
Those who’ve long-perfected their EOFY routine will have noticed that things have been different of late. Ever since STP was passed in 2018, tax time has been undergoing something of a makeover. And now that businesses made up of 19 employees or less have since joined the fold (and those with closely held employees soon to come), STP has resulted in the arrival of an all new streamlined process.
Not only has STP legislation transformed EOFY as we know it, the nature of its online reporting is a central component for businesses seeking to qualify for the government’s COVID-19 related JobKeeper payments – and likely will be for any future stimulus. In short, this is the time to get your clients on board with all things STP.
Cutting through the STP confusion with clients this EOFY
The shift to STP means countless small businesses will move to using digital technology, some for the first time. As Amanda Linton, CEO of the Institute of Certified Bookkeepers (ICB), explains, “This year, we’ll have 500,000 new employers reporting through STP. That means 500,000 people who will need support in understanding what this legislation means for their business.”
Naturally, it’s a change that will take some getting used to – and clear client communication will be critical. So, what will these changes actually look like come EOFY? The key thing to explain is this: where your clients would previously report payroll information to the ATO once a year, they now need to send a report after every pay date through the use of enabled accounting software.
As Amanda explains, “It’s not just about communicating what STP means for EOFY, but also providing your clients with the support to share this information with their employees too.” For example, employees will notice one key difference come tax time: STP has removed the requirement for payment summaries altogether.
For those in need of a helping hand, Xero’s arsenal of STP resources – from talking points to project plans – is here to provide you with everything you need to ensure that your clients aren’t just compliant, but confident about what the latest changes mean for their business.
Understanding what STP means for advisors come tax time
As we approach EOFY, advisors can expect STP to facilitate a smoother and more streamlined process. Amanda explains, “The payroll solution is the absolute source of truth when it comes to year end reporting. As a result, the level of reconciliation between the ATO and the payroll system shouldn't be quite as intense as it used to be. We should also see far less discrepancies thanks to the software.”
Now that employees don’t have group certificates to wait for and advisors no longer have the requisite 14 day window to finalise, reconcile and issue – EOFY promises to be a much faster affair on all fronts. All of which means that accountants and bookkeepers should be prepared for the likelihood that clients may want to sort out their tax affairs a lot sooner than usual.
While this may initially seem like increased pressure, the digitisation process that comes hand in hand with STP ultimately means that EOFY should shape out to be increasingly efficient, accurate and straight forward – so you can spend less time hunting for information and more time supporting your clients through this challenging period.
Deciphering the role that STP plays in JobKeeper payments
As the government seeks to support small businesses through the economic impacts of COVID-19, digital technology will play a critical role. For many businesses, the ATO will use the information captured by STP to help determine their eligibility for JobKeeper payments as well as for any future stimulus.
With so much information on offer when it comes to government support, there’s a lot of confusion out there amongst the small business community. As trusted advisors, you’re in the perfect position to lead the charge. To help start the conversation, Amanda and the team at ICB have put together an exhaustive list of resources to guide you in communicating the ins and outs, including letter templates aimed at both employers and employees.
In turn, the team at Xero is working hard to support the needs of our advisor community as the economic impacts of COVID-19 continue. As well as fast tracking the release of our Xero HQ Payroll feature, updated to help you manage clients’ payroll and STP compliance, we are releasing a host of new features that make payroll work easier, faster and more efficient for the advisors dedicated to helping small businesses across the country.