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Can STP solve Australia’s underpayment woes? The ASBFEO thinks so

A novel proposal to incorporate modern awards into the ATO’s new payroll reporting system has been flagged as a way to help employers navigate the tricky space. But not everyone is convinced.

Tax&Compliance Jotham Lian and Adam Zuchetti 21 November 2019
— 2 minute read

The underpayment of worker entitlements has been making headlines across the country in recent times, with a number of high-profile businesses admitting to payroll errors highlighting the risks businesses face with the current awards system.

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The ASBFEO Kate Carnell believes there is a case to simplify the industrial relations system, and has since suggested utilising Single Touch Payroll as a way to help businesses keep on top of award changes.

“The rollout of Single Touch Payroll provides an opportunity to calculate award wages and entitlements through an algorithm integrated into accounting software such as Xero, MYOB, Quick[Books] and other software systems,” Ms Carnell said.

“This payment algorithm could be owned and updated by the Fair Work Commission to ensure correct wages and entitlements are correct and up to date.”

‘No silver bullet’

Xero head of industry Matthew Prouse told Accountants Daily that STP was not designed to interpret the awards system.

“Single Touch Payroll is not an algorithm — it is a mechanism for employers to submit a report to the ATO every time they process a payroll,” Mr Prouse said.

“There are no smarts or algorithms or logic to actually interpret the information that’s sent.”

While agreeing that more could be done to digitise the current awards system, Mr Prouse believes that simply turning to a digital solution will not be enough to deal with the issue at hand.

“There’s no magic silver-bullet solution from a technology perspective thats going to address underreporting, overreporting or underpayment and overpayment of wages,” Mr Prouse said.

“Technology is part of it, a digital solution is definitely a part of it, but we have to recognise that we have a very complex system that has a lot of moving parts, a lot of people, a lot of different agencies involved, and we need to find ways to bring those pieces together in coherent ways.

“Weve got national awards, state awards, industry-specific awards, and site-specific awards to navigate and Fair Work has a lot of information on each and every award on their website. There are a number of software companies that have digitised that, interpret them and feed into some of their payroll software.

“But the black arts are in the interpretation — it doesnt mean they all draw the same conclusions or interpret it the same way as Fair Work or an employer might or an adviser might.” 

Instead, Mr Prouse believes accountants and bookkeepers will need to play a vital role in helping businesses navigate the complexity of the industrial relations system.

“A lot of that is going to be reliant on employers and employees feeding good data into digital systems and employers getting good advice from accountants, bookkeepers and trusted advisers who are experts in their particular circumstances,” Mr Prouse said.

“It is only going to be as good as the information that employees and ultimately employers feed into the system. 

“Accountants and bookkeepers are incredibly valuable in providing assurance and support for small business owners, but they are going to have to invest the time, effort and energy into understanding the specific circumstances of each and every one of their clients to give accurate advice. If not, we will have the constant problem of garbage in, garbage out.”

MYOB said it would support the “identification of an efficient and cost-effective solution to ensure staff entitlements are paid correctly” but refrained from addressing the STP suggestion directly.

The Fair Work Ombudsman declined to comment on the grounds that it is a policy matter.

Can STP solve Australia’s underpayment woes? The ASBFEO thinks so
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