Single Touch Payroll (STP) is the mechanism to report your employee’s tax and super information to the ATO.
Employers have been required to report payments made to employees and closely held payees to the ATO, using Single Touch Payroll reporting since July 2021. STP reporting is done through your STP enabled payroll software.
With an initial planned release date of July 1 2021 for STP phase 2, keeping in line with mandatory reporting periods for employers, the impact of COVID-19 on payroll meant that phase 2 was postponed to January 1 2022.
However, due to the complexity of the new requirements with STP phase 2, many Australian payroll software systems have been granted a further deferral for implementation until December 2022.
If employers don’t have currently have an STP reporting solution in place, the ATO has also given them until 31 March 2022 to set up and implement a compliant payroll system.
What is currently required under STP phase 1
The existing STP (Phase 1) reporting requirements supply the ATO with the following data for each employee included in every pay event:
- year-to-date values of gross salary or wages,
- allowances or other payments (as relevant),
- deductions and
- PAYG withholding
What will be required under STP Phase 2
Under STP Phase 2, employers are required to report the following additional information to the ATO:
- Tax file number declaration: TFN declaration information will be included in STP reporting. You’ll no longer have to send your employees’ TFN declarations to the ATO.
- Termination reason: The reason someone leaves your employ will be provided in the STP report. Separation certificates may no longer need to be provided upon termination. The date and reason an employee leaves your employment will be included in the STP report.
- Employment basis: It will become compulsory to report the employee’s work type. This includes full-time, part-time or casual, along with new categories like labour-hire, volunteer agreement or non-employee.
- Income stream collection: Employers will need to break down payments into more detail under new income stream collection groupings. There are three types:
- Income types: Previously, income was classified under one label. in Phase 2, each amount paid to an employee will now be assigned to an income type which includes; salary and wages, closely-held payees (e.g. family members), working holidaymakers, labour-hire, etc
- Country code: A country code will be required for employees who report to tax jurisdictions outside Australia.
- Break-down of gross: Currently, STP reports include a gross (total) amount which is the sum of payment types. Payment types will now be broken into detail and include allowances, bonuses and commissions; directors’ fees; overtime; paid leave; salary sacrifice. Paid leave will also be categorised using leave type codes.
- Salary sacrifice: Since these contributions can no longer be used to reduce ordinary earnings or count towards superannuation obligations, they will be separately reported in STP. You can no longer report the post-sacrificed amount via payroll.
- Lump sum E payments: This is used to make lump sum payments for back pay from previous income years. In Phase 2, it must be included in STP reports before finalising an employees’ records. This will remove the need to provide employees with Lump Sum E letters.
What isn’t changing in STP phase 2?
While you’ll need to report additional information in your STP report, there are many things that will stay the same, such as:
- the way you lodge
- due dates
- the types of payments that are needed
- tax and super obligations
- end of year finalisation requirements
STP Phase 2 will require this additional information to be reported with each STP pay event.
Most accounting and payroll software products will be upgraded to include these extended reporting requirements and categorisations in line with the ATO requirements for Phase 2.
If your current payroll system is STP compliant, then there’s nothing you need to do except ensure your payroll solution is working towards being STP Phase 2 compliant by the end of March 2022.
The aim of STP phase 2 is to make it easier for employees to interact with Services Australia by allowing employers to report all required information to multiple government agencies. If you are using STP compliant software, there’s nothing you need to do at this time. If you are unsure about your payroll software or would like to review your payroll software and systems before STP Phase 2 starts, contact us for a free consultation today. Numble are experts in Australian Payroll
