It was announced in the 2019–20 Budget that the government would be expanding on Single Touch Payroll (STP) to require additional information. Known as Single Touch Payroll Phase 2, the mandatory start date of this new process was the 1st of January 2022.
This expansion was meant to streamline reporting for employers who are required to report information on their employees to multiple government agencies. It will also make it easier for customers of Services Australia to receive the correct payments on time.
As we near the end of the first year of Phase 2 reporting, it becomes more important to make sure you are reporting correctly. Penalties for reporting mistakes will start to be enforced after 31st December 2022.
Although users of some types of software, in particular Xero, have a blanket extension from the ATO until the 31st March 2023 to report their first STP Phase 2 pay run.
Our knowledgeable Geelong Accountants have put together some information on the Single Touch Payroll Phase 2 expansion, to serve as a helpful guide for you to reference at any time.
The first thing you should do as a business is to acquaint yourself with Single Touch Payroll Phase 2 and how it impacts your reporting requirements.
Preparation is key. A comprehensive dialog with business leaders, advisors, and employees to determine your individual organisation’s requirements. Then you can formulate and implement a plan ahead of the compliance deadline.
Ensure that your payroll software is up to date. Software providers have updated their payroll solutions to accommodate these changes, allowing your businesses to provide the newly required information.
The way you submit your Single Touch Payroll report, the due date, and the end-of-year finalisation declaration for each employee have not changed. Tax and superannuation details are still required as before.
While the first installment of Single Touch Payroll was introduced to reduce reporting requirements and allow Australian businesses to digitally engage with Government agencies in a single process, Phase 2 does require businesses to undertake additional reporting. The changes will be an adjustment for many.
STP Phase 2 aims to streamline your reporting process by including information that you currently provide in different ways and on different forms all in one place in your STP report. This brings with it changes that reduce reporting requirements in some areas and require additional reporting in others. The following areas reflect these changes:
Tax File Number Declarations
The details collected from Tax File Number declarations – including Tax File Number, employment type, and higher education debts — are to be included in STP reporting, so the declaration itself is no longer required to be sent to the ATO.
Employee Separation Certificates
Employee Separation Certificates are no longer necessary, as information about why an employee has left the business will now be provided via STP reporting.
Lump Sum E payments
Before, if an employer paid an employee a payment owing from a previous year, a Lump Sum E letter had to be provided to the employee. The letter is no longer required as this information is now to be included in STP reporting, with details of the payment to appear in the income statement of the employee.
There is now the option to include child support garnishees and deductions in STP reporting, reducing the need to provide documentation to the Child Support Registrar.
Optional prior to the introduction of STP Phase 2, reporting of employment type is compulsory under the new way of reporting. Businesses must declare whether their employees are full-time, part-time, or casual, in addition to new categories such as labour hire or volunteer.
Disaggregation of Gross
Income must now be itemised by each of its components, including salary sacrifice, overtime, paid leave, bonuses, commissions, director’s fees, and allowances (allowances must also be individually itemised) rather than reported as a gross sum.
If you have Australian resident employees working overseas, businesses will need to provide details of the host country, in the form of a Country Code.
Reporting previous Business Management Software IDs and Payroll IDs
You can now provide the ATO with previous Business Management Software IDs and Payroll IDs in your STP report. If you’ve changed your business structure or changed payroll software and you’re having trouble with finalising previous records, providing this information can help reduce and fix issues with employees’ duplicate income statements in ATO online services. This is voluntary and not all software platforms will offer this functionality.
Benefits for employers
Single Touch Payroll Phase 2 information is intended to streamline employer interactions. You’ll no longer have to send the ATO your employees’ tax file number (TFN) declarations, Employee Separation Certificates or provide your employees with Lump Sum E letters, as your requirements for these are met all in one place, in your STPP2 reporting. If you were using a concessional reporting option, such as for closely held payees or for inbound assignees, you can now meet your requirements, again all in one place, by reporting on income types in your STPP2. You can also voluntarily report child support deductions or garnishees (or both) through STPP2 reducing the need to send separate advice to the Child Support Registrar.
Payroll information is shared in near real-time with Services Australia, making it easier to provide or confirm employment and payroll information about your employees, and for your employees to provide employment and payroll information such as pay slips for prior periods.
Benefits for employees
The ATO will have better visibility of the types of income employees have received at tax time, allowing their details to be more accurately pre-filled on their individual income tax returns. The new information reported will allow the ATO to prompt employees to make changes if they’ve provided their employers with incorrect information so they can avoid getting a tax bill.
The introduction to STP Phase 2 came with a grace period for reporting mistakes, which is scheduled to finish on December 31st, 2022. As mentioned earlier, this excludes users of some types of software, in particular Xero, who have a blanket extension from the ATO until the 31st of March 2023 to report their first STP Phase 2 pay run.
For more information on popular software solutions Xero and MYOB, see these links:
Under STP, the penalty for late or missed reporting is $210 days for every 28 days your report is overdue to a maximum of $1,050 for small businesses, $2,100 for medium entities, $5,250 for large entities, and $525,000 for global entities.
Changes in reporting requirements can be daunting, but our expert Geelong Accountants at The Hrkac Group are committed to providing you with sound business advice and updates. If you want to grow your wealth, improve cash flow, and minimise your tax, talk to our professional, approachable, and proactive Business Accountants at The Hrkac Group.
The expertise and experience of our Geelong Accounting team can help ensure the success of your business. To make an appointment to meet with one of our friendly Accountants today, feel free to contact us via email or phone at (03) 5224 2366.
The information provided in this blog is of a general nature only and is not intended as either advice or recommendations and is not tailored to your specific circumstances. Please also note that this does include any information on any Payroll requirements imposed by any State or Territory Governments outside of the State of Victoria. Please contact our partner – SIBS Bookkeeping team or us – the Hrkac Group Accountants team – if you would assistance as to how, or if, any of the abovementioned would apply to you.
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