Advisors: Here are your top EOFY and STP queries answered

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As every accountant or bookkeeper will confirm, when it comes to year-end, it pays to be prepared. As we make our way towards the 2020/21 season, amidst what has been an incredibly challenging period for small businesses, you’ve likely never been busier. But while the impacts of COVID-19 continue to be felt, the requirement of EOFY remains.

Even those who have long-perfected their EOFY routine will know that things have been different of late. Ever since Single Touch Payroll (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, STP has resulted in the arrival of an all new streamlined process.

As we draw closer, the Xero team is sharing some of the most commonly asked questions from our partner community – and connecting you with the answers and resources you need to master all things EOFY and STP.

1. How has STP legislation affected the EOFY process?

Advisors can ultimately expect STP to facilitate a smoother and more streamlined EOFY process. This is because any payroll discrepancies are now identified within the accounting software during each pay run throughout the year. As a result, mixups are flagged before the tax time crunch and EOFY is no longer slowed down by a backlog of errors.

2. What will the removal of payment summaries mean come tax time?

Under STP, employees no longer have payment summaries or group certificates to wait for, meaning that advisors no longer have the requisite 14 day window to finalise, reconcile and issue – so 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.

3. Does a faster EOFY process mean more pressure on advisors?

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.

4. What are the main changes my clients will experience as a result of STP this EOFY?

The shift to STP means countless small businesses will move to using digital technology, some for the first time. 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 a result, they’ll no longer need to lodge a payment summary annual report for any information that has already been reported and finalised through STP.

5. Will employees notice any differences?

Employees will notice one key difference come tax time: STP has removed the requirement for payment summaries altogether. Instead, the ATO now makes this information directly available to employees through their individual myGov accounts in an income statement.

6. With so much going on at the moment, how can I simply and effectively explain what STP will mean for my clients this EOFY?

Naturally, the move to STP and (in a number of cases) digital reporting is a change that will take some getting used to – and clear client communication will be critical. Beyond explaining what STP will mean for your clients this EOFY, it’s important to provide them with the support to share this information with their employees too.

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.

7. In light of the evolving COVID-19 situation, will we see any lodgement deferrals this year?

In response to the current situation, the ATO will apply automatic lodgement and payment deferrals for company 2018/19 income tax returns to the new due date of 5 June 2020. While 2018/19 income tax returns for individuals, partnerships and trusts can also be lodged by 5 June, provided clients pay any liability by this date.

In addition, 2019/2020 fringe benefits tax annual returns have been deferred to 25 June 2020. And income tax returns for the 2019/20 financial year will be available for finalisation and lodgement to the ATO from 1 July 2020.

8. How do I enter reportable fringe benefit amounts with STP within Xero?

To submit reportable fringe benefit amounts with STP within your Xero account, simply go to ‘Payroll’, then ‘Single Touch Payroll’, and lastly ‘Finalisation’. Then, click on the employee’s name and open their year-to-date summary. Next, enter RFBAs as required, click ‘Save’ and you’re all done. For any other questions of this nature, you can head to Xero Central.

9. Where do JobKeeper payments come into it?

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.

To qualify for JobKeeper, employers need to demonstrate a 30% fall in revenue (assuming their turnover is less than $1bn) and continue to lodge their activity statements and report payroll using STP. In response, Xero’s software has been adapted to make the entire process as streamlined as possible. So you can check your clients’ JobKeeper eligibility, we’ve built a simple tool within Xero to help easily calculate change in revenue over a chosen period of time.

10. How do I keep track of both payroll and STP compliance this EOFY?

The team at Xero is working hard to support the needs of our advisor community. Our Xero HQ Payroll feature has been updated to help you manage clients’ payroll and STP compliance.

In these challenging times, it’s important to feel prepared for whatever’s around the corner. The Xero team has compiled our top resources to help you and your clients prepare for all things EOFY so you’ll have the information you need come tax time.

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