In the 2019-20 Budget, the government announced that Single Touch Payroll (STP) would be expanded to include additional information.
The mandatory start date for STP Phase 2 reporting was 1 January 2022, however, like many of our clients, if you are using Xero for Single Touch Payroll, the commencement of STP Phase 2 will not be until December 2022.
Other STP providers are also still updating their solutions to support Phase 2 reporting. Your provider will let you know when your solution is ready.
What does Phase 2 entail?
Under STP Phase 2, you will be required to report additional information to the ATO under a few new areas. The main ones to be aware of relating to the following:
- Tax file number declaration: Currently, these declarations capture details on employment type (full time, part time or casual) and different tax factors that influence PAYG withholding, like a HELP debt, as well as the TFN itself. This will all be included in your STP report via an automated six-character tax treatment code for each employee and means TFN declarations will no longer need to be sent to the ATO after collection.
- Termination reason: The reason why someone leaves a business will need to be provided in your STP report, such as if it was voluntary or a redundancy. This means no more employee separation certificates.
- Employment basis: Previously optional, it will become mandatory to report an 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: Phase 2 will require employers to break down payments into more detail under a new grouping called income stream collection. This has three main areas:
- Income types: Where before income was classified under one label, in Phase 2 each amount paid to an employee will now be assigned to an income type. These include salary and wages, closely held payees (e.g. family members), working holiday makers, and labour hire, among others.
- Country code: You will have to include a country code for employees who report to tax jurisdictions outside of Australia. This is most relevant for businesses with staff on certain visas (like working holiday) as you will need to provide their home country.
- Disaggregation of gross: Currently, STP reports include a gross (total) amount which is the sum of a number of payment types. This will now be broken into more detail to include: allowances (all must be separate); 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 need to be separately reported in STP. You can no longer report the post-sacrificed amount via payroll.
- Lump sum E payments: This is used when you make lump sum payments for back pay from previous income years. Previously, it was shown on a separate line item in an employees’ payment summary. 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 do these changes mean for my business?
Although you will need to provide the ATO with more information, the way you submit STP won’t change. Ultimately, the impact of STP Phase 2 will differ based on the unique qualities of your business and employees. We’ll keep you updated on any changes that need to be made.
Why is the ATO asking for this information?
Phase 2 of STP includes reporting this additional information to:
- reduce the reporting burden for employers who need to report information about their employees to multiple government agencies
- support the administration of the social security system.
Please remember if you are using Xero for STP, you will be advised before December 2022 of the new requirements.
And if you still have questions regarding Single Touch Payroll Phase 2 please don’t hesitate to call or email your STS Accountant today!
This information was sourced from www.ato.gov.au and xero.com.au