The team at Advivo Business Advisors and Accountants explain what you should expect from the expansion of STP.
Single Touch Payroll (STP) works by having employers report their employee’s tax and super information to the ATO each time a pay run is processed. In the 2019-20 Budget, the Government announced that STP would be expanded to include additional information. This expansion is known as STP Phase 2 and will come into effect on 1 January 2022.
STP Phase 2 explained
The aim of STP Phase 2 is to reduce the reporting burden for employers who need to report information about their employees to multiple government agencies.
By capturing more data in each payroll submission, the ATO will be able to fill information gaps and gain a better insight into employee payment details that weren’t previously being transmitted. This additional data will be shared more widely between the ATO and relevant government bodies, ideally reducing manual processes and increasing communication between businesses and the government.
What additional data is being captured?
STP Phase 2 reporting will require the collection of the following data:
Itemisation of gross
Currently, your STP report states a gross amount that combines the total of many different components and payment types into one. Because some of these components are treated differently for social security purposes, you will now need to report more detail.
STP Phase 2 will require the following components of the gross amount to be separately itemised:
- Bonuses and commissions
- Director’s fees
- Paid leave
- Salary sacrifice
Tax file number declaration
Under STP Phase 2 you will no longer need to send TFN declarations (or updates) to the ATO. Instead, you will include this data in your STP reporting along with the following information:
- Cessation date and reason
- Employment basis
- Tax treatment
Income stream collection
A new field called income stream collection is being introduced for employers to determine the type of payment made to employees. This includes income type, payment type and, in some circumstances, country code.
Child support garnishee/deduction amount
STP Phase 2 will also allow for child support deductions/garnishees to be reported via pay events. This will remove the need to submit a separate deduction report to relevant agencies on a monthly basis.
Lump sum E letters
If you make a lump sum E payment, the amount for each financial year relevant to the lump sum E amount paid must now be included in your STP report before finalising your employee’s records. In most cases, this will remove the need for you to provide the lump sum E letter altogether.
Transitioning employees from another payroll system
If your business transitioned from one payroll system to another, you will be able to provide this information in your STP report. The ATO will be able to link the BMS ID/payee ID from a previous payroll platform to the BMS ID/payee ID generated by a new payroll platform so that there is only one income statement reported for each employee.
Negative YTD reporting
The ATO will allow negative YTD amounts to be submitted in the STP report.
What is staying the same?
Despite STP Phase 2 reporting requiring additional information, there are many things that aren’t changing, such as:
- the way you lodge your STP report
- the date STP reports are due (on or before payday)
- the types of payments that are in-scope for STP reporting
- taxation and superannuation obligations
- end of year finalisation requirements.
What do you need to do?
If your STP-enabled software is compliant and up to date, you have nothing to do but run your payroll as usual. When it is updated, your STP software provider will let you know what your next steps are.
In the meantime, if you have any questions or need any advice on your Single Touch Payroll obligations for your business, please contact our Brisbane team today.