Single Touch Payroll Tax and Compulsory Super Reporting

The ATO called for comments and suggestions on the Single Touch Payroll processes. The discussion paper makes it possible for software suppliers to provide a higher level of automation on the processing of PAYG income tax deductions and deductions for compulsory super contributions.

The paper assumes the system is implemented as an organisation centric rather than as an individual centric system.  Welcomer made a submission that an individual centric system should be permitted and that the regulations around Single Touch Payroll should not preclude an individual centric approach.

The way Single Touch works is.

An organisation gets all the information about an individual and calculates all deductions and sends to the Tax Office the money for tax and the information on the payroll for each individual.  That is, the organisation has to know the individual's tax file number and has to report the tax for the individual.  They have to do the same for the compulsory super contributions but send the money to the super funds, the data to the super funds and the data to the tax office. The software systems will do all this.

At the end of the year the tax office, with the individual, reconciles all these payments.

The alternative - complementary approach is to use individual centric software where tax file numbers and super choices are handled by the individual and not by each different employer.  This would remove a considerable burden from employers as they would not have to know the individual's TFN or super fund.  These interactions would be directly between the individual and the tax office and the super funds without the employers as an intermediary.

Using this approach the individual's tax obligations are calculated for the year as it happens and there is no need for an end of year reconciliation with respect to PAYG tax nor Super Contributions.  This approach will save all parties time and effort.