The Single Touch Payroll (STP) program started on on 1 July 2018 for employers with 20 or more employees and July 1 2019 for employers with 19 or fewer employers and is a mandatory obligation. Concessions for employers was due to end July 1, 2021 with businesses required to be reporting each pay through STP by this date. If you have not started reporting through STP, you will need to start as soon as possible.
In the 2019-20 Budget, the government announced that it would expand the data collected through STP, also known as STP phase 2. While the mandatory start date for phase 2 will be January 1, 2022 there is nothing you need to do just yet, however Abbotts have prepared everything you need to know when the time comes.
How is it different to phase one?
Phase 2 is the next step in the STP journey. Where phase one involved reporting employees’ tax and superannuation to the ATO, phase 2 aims to reduce the burden on businesses required to report information to multiple government agencies. This will make the process smoother.
When do I need to be compliant?
Officially, the mandatory start date is January 1, 2022. However, Abbotts clients working with Xero will be covered by a deferral until December 31, 2022.
What will be included in phase 2?
Under STP phase 2, businesses will be required to report additional information to the ATO under new areas. The key features to be aware of are:
- Tax file number declaration: Currently, these declarations capture details on employment type and various tax factors that influence PAYG withholding, such as a HELP debt, as well as the TFN itself.
- Termination reason: The reason why someone leaves a business will need to be provided in your STP report. Previously, businesses were required to supply separation certificates when an employer departed the business.
- Employment basis: It will now 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, 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 as you will need to provide their home country.
- Disaggregation of gross: Currently, STP reports include a gross amount which is the sum of a number of payment types. This will now be broken into more detail to 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 now 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 does this mean for my business?
Although this means providing the ATO with more information, the way STP will be submitted will not change. Ultimately, the impact of phase 2 will differ between businesses. However, Abbotts is here to guide you through the changes.
What do I need to do right now?
Nothing just yet. The ATO is currently working with software providers to capture the STP Phase 2 information, however Abbotts can provide you with assistance to make the transition easier.
How can I find out more?
For more information on mandatory requirements and timelines, visit the ATO website.
To update your accounting software to an STP-enabled version that will adequately suit your businesses needs ready for phase 2, please speak to one of our professional staff at Abbotts on 08 9321 2642 or book a time with one of our experts.