Single Touch Payroll (STP) Phase 2 came into effect from 1st January 2022 to include additional information each time you file your STP with the Australian Tax Office (ATO). This phase of STP streamlines interactions that you as an employer, and your employees have with the ATO by reporting more detailed information.
What action should employers take regarding STP Phase 2?
Whilst it took effect on the 1st of January, if you haven’t updated your payroll data to be compliant with the new requirements, there is no need to panic. At this stage there are a number of extensions available, depending on the software that you use to process your payroll.
Payroll software providers are working on updating their software to include the new data requirements and providers such as Quickbooks Online, MYOB and Xero have all been granted extensions to 31 December 2022 to implement the changes.
Your payroll software provider should have contacted you to let you know of their extension deadline by now. If you are unsure of this, please contact your software provider, or your team member at Davidsons so that we can help you determine your deadline.
If you are with a software provider that has not been granted an extension of time to be STP Phase 2 compliant, there is a general exemption the ATO have put in place through until 31st March 2022.
What additional information needs to be included in STP Phase 2 lodgements?
The ATO has produced a Guide for Employers you may wish to review for more detail but in summary, the main points are:
Disaggregation of Gross Income
The various components that make up the gross income of your employees will be reported separately as normal gross, paid leave, allowances, overtime, bonuses and commissions, directors’ fees, salary sacrifice and lump sum W
Employment and Taxation Conditions
You currently advise this information to the ATO in different ways, and STP Phase 2 simplifies this for you. Through STP you will now advise the ATO of their employment status, the information on their TFN declaration and the details of when and why they leave your employment.
Tax Types and Income Types
Every employee will now be assigned a 6 character tax treatment code and a 3 character income type code. Most software solutions will automatically assign the correct codes to each employee from the data you enter that would normally be included on their TFN declaration.
If you make payments to Australian residents that work overseas, you will need to provide information about the host country.
Child Support Garnishes and Child Support Deductions
You will have the option to report this through STP instead of reporting separate remittance advices to the Child Support Registrar. As it is optional, some software providers may not include this in their upgrades.
Reporting Previous Software ID’s and Payroll ID’s
Reporting previous Software ID’s and Payroll ID’s – If you change your business structure or change software providers and can’t zero out or finalise previous records, you may have the option to advise this through STP. This will help reduce and fix issues with duplicate income statements for employees in ATO online services, and again, is optional, so some software providers may not include this in their upgrades.
When your software has been updated for these changes, your software provider will supply instructions on what you need to do to update each employee to be in line with the new criteria. To assist with this transition, the ATO has announced that there will be no penalties for genuine mistakes for the first year of Phase 2 reporting through until 31 December 2022.
As always, we are here to help you. If you need assistance with your STP obligations, or you would like to speak with one of our payroll specialists, please contact us on (03) 5221 6399 or at firstname.lastname@example.org.
Would you like to stay up to date on the latest accounting information impacting businesses from Geelong and the Surfcoast? Sign up for our monthly newsletter ‘The General Account’ here.
Disclaimer: This information is of a general nature and should not be viewed as representing financial advice. Users of this information are encouraged to seek further advice if they are unclear as to the meaning of anything contained in this article. Davidsons accepts no responsibility for any loss suffered as a result of any party using or relying on this article.
This article was written by Davidsons Bookkeeper Leanne Hamer.