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!
Reporting is mandatory; if you don't, your Business is non-compliant with Government Legislation, and penalties will eventually apply. The Government requires that Employers report but provides no direct ability to facilitate this. That's the wisdom and logic behind Single Touch Payroll. It is a B2G (Business-to-Government) interaction, and reporting is compulsory, but the Business has to bear the costs to report to the Government.
Standard Business Reporting (SBR) is a Whole-Of-Government initiative and is part of the bigger "digital by default" policy. The ATO, 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 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 and send the data, it costs money. Similarly, receiving a message from the Government costs money. Making mistakes and sending the corrections also costs money!
Reporting using Standard Business Reporting (SBR) was free, but with the change to SBR2, there is a cost involved. Yes, software developers 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 solution. However, it still costs for development, and that cost of the service will eventually be passed on to the Employer. I also appreciate that the larger DSPs may not be worried about the potential demise of the smaller DSPs, but obviously, reduced competition within the industry would easily result in a 'free for all', allowing 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 is that the more SSPs that enter the market, the more competition and 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 an 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, Employers cannot report using STP until the DSP sources another SSP. And what happens if only a few SSPs enter the market? It is Australia, and our market is not big enough for numerous SSPs to justify the amount of money 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 using a Government-enabled portal. From a technical standpoint, this would have required development by the DSP using existing API and SBR technologies, but the actual cost of sending the data would have been completely negated. Market opportunities would still be available for SSPs 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 Single Touch Payroll Advisory Group member, 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 DSPs will not include that cost within their pricing models and offer it as a separate service for an additional fee. Those expenses will be added to the Business's bottom line and will be passed onto everyone added to their goods or service charges.
The more employees, the bigger the cost. How does this translate for Businesses looking at the bottom-line costs of hiring new staff, or will they reduce their workforce? Despite 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.
The Government is not making any money from reporting STP submissions; businesses are losing money reporting STP information. It does not cost the ATO to receive and process that data, but it costs the employers to send the data. I'm sure the ATO is not exempt from paying STP reporting fees. Who is paying for those additional costs, you and me as taxpayers?
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