The Australian Federal Government announced in the 2019-20 Budget, their planned expansion of Single Touch Payroll (STP).
Known as STP Phase 2 (STP2), the expansion will reduce the burden for employers who need to report information about their employees to multiple government agencies. The mandatory start date for STP2 reporting was on 1st January 2022, however, most major financial software providers have been granted extensions on their reporting deadline.
When to start reporting STP2
You need to find out when your digital service provider (DSP) will be ready for STP2. This is your financial or payroll software. Most large software providers, have been given extensions on the start date, including Xero who has a deferral to 31/03/2023
If you can start reporting by your DSP’s deferral date, you don’t need to apply for more time. You can apply to the ATO for an extension past your DSP’s deferral date if you need more time to transition.
A lot of the information you need will most like already be in your payroll software. Many of the key changes are in relation to how this information is sent to the ATO. This will require the checking and re-coding or re-mapping of some of the payroll accounts in your DSP.
The key changes to STP that will be introduced in phase 2 are:
- Disaggregation of gross – Current STP reporting includes only a gross amount. This approach has changed in STP2 where all payment types are now reported consistently for each income type. This includes a separation for reporting of:
- Gross (Ordinary Time Earnings)
- Paid Leave
- Bonuses and Commission
- Directors Fees
- Lump Sum W (return to work bonus, back and arrears payments)
- Salary Sacrifice
- Employment and taxation conditions – STP2 will streamline the reporting to the ATO of:
- Employment basis
- TFN declaration
- Termination date and reason
- Income types – More flexibility for reporting of income types will be introduced:
- identify payments you make to your employees with specific tax consequences
- make it easier for them to complete their individual income tax return
- help us identify where you are using a concessional reporting arrangement.
- Country codes – Country codes for Australian residents working overseas will be required in STP2 reporting
- Child support garnishees and child support deductions – You’ll have the option to include child support garnishees and deductions in your STP2 report. This will reduce the need to give separate remittance advices to the Child Support Registrar.
Benefits for Employers
STP2 will streamline employer interactions with the ATO and other government organisations. STP2 information will be shared with Service Australia and the Child Support Registrar.
- Employers will no longer be required to send TFN declarations to the ATO.
- If an employer makes a Lump Sum E payment, they will no longer be required to provide Lump Sum E letters to their employee.
- Employers no longer need to provide separation certificates to your employees.
- Employers no longer need to send separate remittance advice to Child Support Registrar
- Employers using a concessional reporting option, such as for closely held payees, will be able to tell us through reporting income types.
- Employers will no longer be required to provide payslips or reports to Service Australia for their employees
Benefits for Employees
STP2 will also streamline your employees’ interactions with the ATO. This will make filing their tax returns easier at the end of the financial year. The ATO will also share information with employers that may not have been shared by their employees, such as if they are on study or training support loans.
As your DSP becomes STP2 enabled, they should prompt you through the steps of enabling STP2 on your file. You will need to check all your employees deatils and the salary and wages reporting categories are correct. This is especially important in reference to Disaggregation of gross (see above).
The ATO has prepared this checklist to help you prepare for STP2 – ATO STP2 Checklist
Pacific Accounting are also here to help. We will enable your DSP for STP2 reporting and checking for compliance for:
$150+gst up to 30 employee and then $3+GST per employee thereafter.
Please speak to your accountant to confirm the acceptance of this service. If you have any other questions, please contact our office on 1800 1800 98.