This report covers the introduction of Single Touch Payroll in Australia from 1 July 2018 concerning the reporting of payroll information, including pay as you go (PAYG) withholding tax and superannuation contributions.
From 1 July 2018, Single Touch Payroll (STP) will streamline how Australian payroll information, including pay as you go (PAYG) withholding tax and superannuation contributions, is reported to the Australian Taxation Office (ATO).1
While the main impact will be on Australian employers, it will also affect foreign employers who use Australian payroll to deliver any elements of pay or manage Australian tax obligations.
Foreign employers with employees working in Australia and remaining on the foreign employer’s payroll have managed the Australian PAYG withholding tax and compensation reporting obligations for these employees through one of the following mechanisms:
Under this arrangement, the foreign employer continues to operate the payroll and to pay its employees working in Australia, with all reporting on payroll and PAYG tax withholding processed by the Australian entity, generally in line with the standard Australian payroll process.
This has resulted in an annual PAYG payment summary disclosing the gross wages/salary and PAYG tax withheld. This mechanism also facilitates compliance with the new STP obligations
In certain circumstances, an application can be lodged with the ATO for approval to eliminate the foreign employer’s obligation to withhold PAYG tax from specified employees’ salary/wages for a fixed period of time.
This requires the foreign employer to take responsibility for payment of employee income tax and any fringe benefits tax liabilities that may arise while the employees are in Australia.
Importantly, the approval requires the foreign employer to provide its employees covered by the variation with an annual earnings statement containing the information that would ordinarily be disclosed on a PAYG payment summary.
These mechanisms continue to be available in conjunction with the increased reporting requirements of STP.
In preparing for the new STP obligations, foreign employers with expatriates working in Australia and remaining on the foreign employer’s payroll should make sure they have one of the above ATO-accepted procedures in place to manage their Australian tax reporting and withholding obligations.
1 For additional information, see “Single Touch Payroll,” on the ATO website.
The information contained in this newsletter was submitted by the KPMG International member firm in Australia.
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