Single Touch Payroll Phase 2

Single Touch Payroll Phase 2 is an expansion to include additional information. It’s designed to reduce the reporting burden for employers who need to report information about their employees to multiple government agencies. The mandatory start date for STP Phase 2 reporting is 1st January 2022.

Here’s all you need to know about the benefits, what’s changing, what’s staying the same, and what you need to do – if you’re ready or not!

Benefits of STP Phase 2

For Employers

Overall the benefit is to streamline employer interactions. As an example, employers will no longer need to submit employee’s TFN declarations to the ATO – employees provide it and it is simply kept with employee records.

Payroll information reported is shared with Services Australia in near real-time meaning that requests such as confirming employment and employee payroll information, and employee requests for information such as pay slips for prior periods, is streamlined.

Other benefits to employers include:

  • Employers may no longer need to provide separation certificates – the date and reason for leaving will be in the STP report.
  • Employers can voluntarily report child support deductions and/or garnishes through STP – no more need to send separate remittance advices to the Child Support Registrar.
For Employees
  • Better visibility of the types of income you’ve received and where it should be pre-filled on income tax returns
  • STP information shared with Services Australia will streamline your interactions with them – pre-filling details, reducing how often they need to contact you, reducing the amount of documentation needing to be submitted during a claim, and enhancing the Family Tax Benefit process.

What STP Phase 2 Means For You

It’s a bigger move towards more complete digital records and reporting making it easier for everyone. Although there’s more information you need to provide, the way employers manage Single Touch Payroll won’t change. 

What stays the same?

While more information* needs to be reported in an STP report, many things stay the same, including:

  • The way you lodge your STP report today
  • STP reports are still due on or before payday unless you are eligible for a reporting concession
  • the types of payments that are in-scope for STP reporting
  • taxation and superannuation obligations
  • end of year finalisation requirements.

*Most of the additional information which needs to be reported should already be captured in current payroll software.

What Changes?

Key changes to the STP report include:

  • Disaggregation of gross – since this total includes many different components and payment types and some are treated differently for social security purposes, more detailed reporting is now required.
  • Employment and taxation conditions – STP streamlines the reporting of employment types, the information on employees’ TFN declarations and details of when and why employees leave employment.
  • Income types – introduced to ensure more flexibility around the reporting of payments made to employees with specific tax consequences, making it easier for individual income tax returns, and identifying concessional reporting arrangements.
  • Country Codes – this will need to be provided should you make a payment to an Australian resident working overseas and that information provided about the host country.
  • Child Support garnishes/deductions – the option to include these in your STP report will reduce the need to give separate remittance advices to the Child Support Registrar.
  • Reporting previous Business Management Software & Payroll IDs – you may have the option to provide previous Business Management Software & Payroll IDs in your STP report – perhaps when you’ve changed your business structure or changed software and can’t zero out or finalise previous records. Providing this information will help reduce and fix issues with duplicate income statements for employees in ATO online services.

What you Need to Do to Get Ready

If you’re an employer, right now there is nothing for you to do. Payroll providers are building and testing the solution ready for the 1 January 2022 roll-out. They will let you know what you need to do closer to the date. 

Don’t think you’ll be ready for 1 January 2022?

Payroll providers can apply to the ATO to defer their start date.
If you’re an employer and your payroll provider gets an extension, you will automatically qualify for the extension too.

For employers wanting to extend their timeline independently of their payroll provider, you need to apply via the ATO.

Legal responsibilities are constantly changing and evolving for businesses. Get in touch with Beyond Advisors for clarity and to avoid complications when preparing for Phase 2 of the Single Touch Payroll.

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