In the 2019/20 budget, the Australian government announced that Single Touch Payroll (STP) would be getting a makeover to include extra information. In fact, the extension of STP means significantly more data now needs to be reported to the ATO. So why the need for the extra reporting? Well the idea is that the collection of this additional data will ensure that employees get paid correctly as well as remove the burden for employers to share their employee information will multiple government agencies. STP2 will also assist Services Australia with payments to its service users (some of whom may be your employees).
When does STP Phase 2 start?
Single touch phase payroll (phase 2) actually began on the 1st of January 2022. However, the government granted extra time for businesses. Essentially, if you start reporting under STP2 by the 1st of March 2022 then you’ll be considered as having met the deadline.
If you’re the customer of a digital service provider (e.g. the user of cloud based payroll software or accounting system) then don’t despair. Many have applied for deferrals for all of their users to allow for the extra time needed to update and upgrade their platforms and solutions. A good example is users of our own product EmpowerHR. Customers won’t need to report their first STP2 pay run until the 31st December 2022. If you’ve not heard from them by now, contact your accounting or payroll software provider to see if a deferral period has been negotiated for you.
The ATO have advised that some organisations can apply for an additional deferral beyond that already negotiated by their digital service provider. Find out more HERE
What changes to reporting does STP Phase 2 actually mean?
STP Phase 2 means more data needs to be shared with the ATO with each payment period. The most notable change is that you now need to separate the components of gross pay, making it easier for employees manage their tax return deductions. The changes provide more visibility to Services Australia; they can identify the different sources of income for the calculations needed to make awards under their programs. Plus ATO will use the information to validate PAYG withholding amounts and estimate superannuation guarantee amounts ensuring that employers like you meet their obligations.
You’ll now need to break down gross pay into the following items:
Under STP2 the following components of gross earnings will need to be itemised separately:
- Gross Payments
- Bonuses and commissions
- Allowances (by category)
- Paid leave (by time of leave
- Director’s fees
- Lump sum payments and employee termination payments
- Salary sacrifice and deduction amounts
Anything that’s not included in the above will be reported separately
Is any additional data being collected? - yes it is:
Under STP2 - additional information collected by the ATO includes:
- Basis of employee’s employment; i.e. full-time, part-time, casual, labour hire, non-employee
- The tax treatment for the employee; applicable tax scale, options within tax scale, STSL status, medicare levy options, tax variation
- The reason for an employee’s termination; voluntary cessation, redundancy, dismissal, contract cessation, transfer, ill heath or death
- Income type and country codes; closely held payees, inbound assignees, working holiday makers, Australian residents working overseas, labour hire
- The ability to voluntarily choose to report your Child support deductions and Child support garnishees
So what actually remains the same as before?
- There’s no change to superannuation or tax obligations
- The types of payments that need to be made
- The way STP data needs to be lodged and the due dates (including end of year finalisation events)
- No change to the requirement to prepare and lodge Activity Statements (where needed)
The team at Jemini and Fusion5 have an extensive working knowledge of STP including phase 2. We can help you successfully navigate these changes, especially around how this impacts the use of your payroll software. Get in touch with our team to discuss further.