In the 2019-20 Budget, the Government announced that Single Touch Payroll (STP) would be expanded to include additional information.
The expansion of STP, or STP Phase 2, significantly increases the data required to be reported to the ATO. It is hoped that this additional reporting will assist in ensuring employees are paid correctly as well as reducing the need for employers to report information about employees to multiple government agencies. It will also help Services Australia’s customers, who may be your employees, get the right payment at the right time.
When does this take effect?
The mandatory start date for Phase 2 reporting is 1 January 2022, however the ATO has advised that employers who provide the additional reporting required under Phase 2 by 1 March 2022 will be accepted as having met the deadline.
Digital service providers (DSPs) may apply for a deferral if they need more time to make changes and update their solutions. Such a deferral then automatically applies to customers of that provider too. For example, Xero have advised that they have been granted a deferral until 31 December 2022. This means that all customers using Xero Payroll will also have until that date to report their first STP Phase 2 pay run.
For further information on deferrals for other DSPs, please reach out to your software provider.
For businesses that need more time to transition, you may apply for an extension beyond your software provider’s deferral. You will be able to apply for a delayed transition from December 2021. Registered agents will also be able to apply. The ATO have advised more information will be available soon.
What does Phase 2 include?
STP Phase 2 expands the data being collected each pay period. Most significantly, there is now a requirement to separate the components of gross earnings to assist employees with their tax return deductions. This will also assist Services Australia in identifying different types of income for the purposes of administering their programs.
The additional data will provide information to allow the ATO to validate PAYG Withholding amounts and estimate superannuation guarantee amounts to assist in ensuring employers meet their obligations.
Gross earnings components that will now need to be itemised separately include:
- Allowances (sorted into specific categories)
- Paid leave (classified by specific leave types)
- Bonuses and commissions
- Directors' fees
- Lump sum payments and employee termination payments (classified by type)
- Salary sacrifice and deduction amounts (sorted into specific categories).
Remaining amounts not falling into one of the above categories will be reported as separate items.
The inclusion of salary sacrifice amounts reduced the gross earnings reported under STP Phase 1, whereas these will now be captured under STP Phase 2. Likewise, certain allowances reported separately under STP Phase 1 will be reported in greater detail under Phase 2 and give more insight into payments being made to employees.
Other data captured in STP Phase 2 includes:
- Employee’s basis of employment (full time, part time, casual, labour hire, non-employee)
- Tax treatment of employee (applicable tax scale, options within tax scale, STSL status, Medicare Levy options, tax variation)
- Reason for an employee’s termination (voluntary cessation, redundancy, dismissal, contract cessation, transfer, ill health or death)
- Income type and country codes (closely held payees, inbound assignees, working holiday makers, Australian residents working overseas, labour hire).
What remains the same?
- Tax and superannuation obligations do not change
- The types of payments required to be made do not change
- The way you lodge STP data and the due dates do not change, including end of year finalisation events
- The requirement to prepare and lodge Activity Statements (where applicable).
Our business advisers understand STPR requirements, and can help you successfully navigate and benefit from these changes. Get in touch with one of our team to discuss further.