Updated: Oct 14, 2021
The benefits of STP are enormous, real-time reporting to Government has been a long time coming and is way overdue, but the fundamental flaw with the current Single Touch Payroll (STP) model is the cost!
It is mandatory to report, and if you don't, your Business is non-compliant with Government Legislation, and penalties will be eventually applicable. The Government require that Employers report but provide no direct ability to facilitate this. That's the wisdom and the logic behind Single Touch Payroll. It is a B2G (Business to Government) interaction, and reporting is compulsory, but it is the Business that has to bear the costs to report to Government.
Standard Business Reporting (SBR) is a Whole-Of-Government initiative and is part of the bigger "digital by default" policy. The ATO, being a leading consumer of "big data", has jumped on board to deliver its services via this initiative. STP phase two will involve DHS and DSS, other users of "big data" which, at a minimum, will quadruple the amount of information that is currently being submitted in STP. As we all know: technology costs money, so the Government has decided that every Business should spend money to meet a digital agenda that, at its core, is fundamentally about saving Government money. That’s why STP Schedule 23 was in the Budget (Savings) Omnibus Act 2016...to save money by making Businesses "foot the bill" for digital instead.
Why the costs?
Every time you process a pay run then send the data, it costs money, receive a message from the Government, its costs money, make mistakes and send the corrections, it costs money!
To report using Standard Business Reporting (SBR) was free but with the change to SBR2, there is a cost involved. Yes, those that develop software can choose to build their own ebMS3 AS4 solution but it is technically challenging and as a result, cost-prohibitive for most Digital Service Providers (DSP).
The larger developers may have deeper pockets to afford to produce their own solution but it still costs for development and that cost of the service will be eventually passed on to the Employer. I also appreciate the larger DSP's would not be too worried about the potential demise of the smaller DSP, but obviously reduced competition within the industry would easily result in a 'free for all', allowing for the remaining players to effortlessly increase their pricing.
STP allows for new Commercial Opportunities.
One of the arguments from the Government camp was; "the introduction of STP allows for Commercial opportunities for 3rd parties to create solutions to facilitate STP file submissions". These are now known as Sending Service Providers (SSP). The theory being the more SSP's that enter the market, the more competition, the cheaper their service offerings will be, but the flip side is that theory can go pear-shaped rather quickly. If a DSP is in no other position but to use a SSP, they are at the mercy of that SSP regarding costs. At their whim, the SSP can increase their costs or if the DSP goes out of business then Employers are unable to report using STP until the DSP sources another SSP. And what happens if there are only a few SSP's that enter the market? It is Australia after all and our market is not big enough for numerous SSP's to justify the amount of money that has to be invested in building fully-fledged ebMS3 AS4 solutions whilst obtaining a reasonable ROI.
The easy solution.
There is no question that the basic functionality to submit files should have always been provided by the use of a Government enabled portal. From a technical standpoint, this would have required development by the DSP by using existing API, SBR technologies but the actual cost of sending the data would have been completely negated. The market opportunities would still be available for SSP's by providing value-added features to the basic core functionality facilitated by the Government solution.
We fought hard, but the arguments landed on deaf ears.
We fought bitterly hard to communicate these messages as a very vocal member of the Single Touch Payroll Advisory Group, but all our arguments always landed on profoundly deaf ears.
There is now another burden in paying to send data to the ATO because of a legislative requirement by the Government. Ultimately it is an additional cost for the Employer either indirectly or directly as some DSP's will not include that cost within their pricing models and offer it as a separate service for an additional fee. Those expenses are going to be added to the Business's bottom line and will be passed onto everyone added to their goods or service charges.
The more the employees, the bigger the cost. How does this translate for Businesses looking at their bottom line costs of employees in the decision making processes of hiring new staff, or they may simply make the decision to reduce their workforce? Despite all of our very bitterly hard-fought efforts, Single Touch Payroll (STP) reporting will incur a cost that every Employer will be required to pay irrespective of who they use. If you are not seeing the changes now as a result of the implementation of STP, it's only a matter of time before you do.
The Government is not making money with STP, but the employer is losing money.
To be very clear, the Government is not making any money out of the reporting of STP submissions; Businesses are losing money reporting STP information. It does not cost for the ATO to receive that data and to processes it but it costs the employers to send the data. I'm sure the ATO are not exempt from paying STP reporting fees and who is paying for those additional costs, you and me as taxpayers?
To provide feedback directly to the ATO regarding the cost of STP for your Business, please email firstname.lastname@example.org