Single Touch Payroll (STP) started on 1 July 2018 for large employers, and became mandatory for all employers from 1 July 2021 onwards. Under the first phase of STP, information regarding salaries and wages, PAYG withholding and superannuation was reported to the ATO at each pay run. As part of the 2019-2020 federal budget, it was announced that “STP Phase 2” would be introduced to provide additional information as part of STP reporting. This expansion of STP intends 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 was 1 January 2022, however the ATO advises they will support businesses by adopting a flexible, reasonable and pragmatic approach, based on your business readiness and individual circumstances. If your STP provider is already STP phase 2 compliant, they will have already made the required updates and advised you what you need to do. If your provider is not STP Phase 2 ready, they will have applied for a deferral and should have advised you accordingly. The major accounting programs have advised they have received ATO deferrals, with new reporting start dates as follows;
MYOB: 1 January 2023
Xero: 31 December 2022
Reckon: 1 January 2023
QuickBooks: 1 March 2022
Phoenix Payroll has also advised it will be compliant from 1 March 2022. If your payroll provider is not listed above, please check their website for guidance on whether a deferral applies.
If your STP solution is ready now, you should start reporting(now). If your payroll software is ready and you can start Phase 2 reporting before 1 March 2022, you will be considered to be reporting on time and won’t need to apply for an extension. If you need more time, you can apply for a deferral (i.e. if you require further time, beyond your STP providers ATO deferral date). The deferral application can be done via your online services for business accounts, or contact us, to complete this on your behalf.
The ATO has advised there will not be any penalties for genuine mistakes made during the first year of Phase 2 reporting (i.e. until 31 December 2022).
Some benefits of STP Phase 2 are:
- You’ll no longer have to send your employees TFN declarations or employment separation certificates to the ATO as the information will now be captured via STP (your employee still needs to provide the TFN declaration to you, and you’ll just need to keep this on your records)
- Data will be provided in near real-time, with Services Australia
- More visibility for employees at tax time, with more details of the types of income they’ve received and where it should be pre-filled on their income tax return
- Greater visibility by ATO to check the correct superannuation is being paid for employees
Some of the key differences between Phases 1 and 2 are:
- More details reported under Phase 2 – gross payments will be dissected rather than being lumped under one category (for example, paid leave, lump sum payments, allowances, bonuses and commissions, salary sacrifice, overtime will be reported separately)
- More details of the employee type, such as closely held employees (i.e. family members), working holiday makers, labour hire, etc.
- Country code will be included for employees who report to tax jurisdictions outside of Australia – this is relevant for businesses with staff who have certain visas (e.g. working holiday) as their home country will be reported
- More streamlined employee information, including employment basis (full time, casual, part time), TFN, whether the employee has a HECS/HELP debt, and details of when and why they leave your employment (e.g. voluntary or redundancy)
- Child Support deductions and garnishees, can be included in the STP report, reducing the need to give separate remittance advices to the Child Support Registrar
Should you have any questions regarding the above, please contact your trusted Hall Chadwick advisor.