Co-design at the heart of new ATO system
A major change to tax and super reporting required close work between the Australian Tax Office and service providers.
From 1 July this year, employers with 20 or more employees began reporting through Single Touch Payroll (STP) — a major change to the way employers report their tax and super information to the Australian Tax Office (ATO). To find out how the ATO worked with digital service providers (DSPs) and the wider industry to deliver this large-scale project, we spoke with Michael Karavas from the ATO’s STP team.
GTR: What is Single Touch Payroll all about?
Michael Karavas: Under STP, employers report payroll and superannuation information to the ATO at the same time they pay their employees. STP streamlines payroll reporting to the ATO by leveraging the payroll software technology that employers already use. There are three options for employers to report via STP; they can either:
- use their existing payroll software once it is updated by their software provider to enable STP reporting;
- adopt a new payroll system that is STP-enabled; or
- use a third party, such as a registered tax agent, to report through STP on their behalf.
GTR: How did digital service providers and their developers respond to this change?
MK: This was a large-scale and complex change for DSPs, yet most were able to meet the 1 July start date. We have effectively managed the transition through our deferral process — where DSPs were given the opportunity to stagger the transition of their customers to STP across their products, which has allowed them to manage this complex change.
GTR: What worked well with the STP project?
MK: We built a very robust co-design and engagement process with our DSP partners. This was key to ensuring that the ATO and most DSPs were STP-enabled from 1 July.
The DSP industry is diverse, made up of large multinational providers with multinational clients, through to mass-marketed providers who focus on small to medium businesses. The systems used by these DSPs also vary in terms of degrees of capability and complexity.
We had to co-design a framework that supported different business processes and products on offer. As a result, the ATO provided a choice for DSPs around such things as timing of reporting out-of-cycle payments and how to report corrections, so they can adopt the process that best suits their products.
Co-designing STP allowed us to understand different payroll processes, be responsive to the needs of our stakeholders and work through any concerns quickly and efficiently. Based on the success of the STP model, this has become a template for other projects in the ATO that involve working with the DSP industry.
GTR: What have been the key learnings gained so far?
MK: It can be a big step for employers to move into Standard Business Reporting (the technology we use for STP). One of the most important steps is for employers to make sure they have the right permissions in place to ensure that they can lodge an STP report. There are specific requirements around the set-up of STP and employers have needed the most assistance at this early stage. For example, we need to ensure that the employer has the right authorisations in place, and that these are recorded accurately within the ATO systems so that once the employer starts reporting with STP, we recognise that it is being lodged by an authorised representative. We’ve been working closely with employers and bookkeepers to streamline this process.
We have also worked closely with DSPs to effectively communicate with employers, to ensure they can access the right information at the right time. We will continue to work collaboratively with DSPs as we bring more employers onboard with STP.
GTR: What is the focus during the transition period?
MK: The transition period for STP is staggered because it’s linked to the deferral process. It allows us to see what employers are doing each time they report, and if we see errors or repeated actions which cause problems in sending and receiving the file, we can work directly with the employer to fix them. Our focus is to support employers and their DSPs and provide updated information based on what we learn throughout the transition period. We view this as a ‘test and learn’ approach, and by analysing employer behaviour, we can adapt or better target our communication with employers as they transition to STP throughout the year.
GTR: How is STP-onboarding tracking?
MK: Since the start of July, we’ve seen steady growth in the number of employers reporting through STP with over 1000 new employers starting their reporting on some days. We expect this number to increase significantly in the coming months.
GTR: Where to from here?
MK: The first year of STP is a transition year for employers with 20 or more employees. We’ll continue to work with DSPs and their clients to support them as they continue reporting or transitioning to STP. There is also a focus on bringing small businesses into STP reporting. While the legislation to extend STP to all employers is yet to pass, we’re already thinking about how we can work with employers with 19 or fewer employees who can transition quite easily through their existing online or cloud-based software. We’ve been engaging with the industry to discuss developing products that are ‘fit for purpose’ for those employers who don’t currently use fully functional payroll software. This obviously provides a lot of opportunity for DSPs in terms of product development.
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