Guide to STP Phase 2 for employers in Australia
In the 2019-20 Budget, the Federal Government announced an expansion to Single Touch Payroll (STP) reporting obligations.
This expansion, known as STP Phase 2, aims to reduce the reporting burden on employers that need to report information about their employees to multiple government agencies.
STP Phase 2 will also help Services Australia issue the correct payment to their customers who may also be your employees.
For example, if you have an employee with a child support deduction, you can report this information solely through Payroller. You will not be expected to report this information again to the Child Support Registrar.
Learn how to add child support deductions and garnishees in Payroller with our handy STP Phase 2 user guide.
The first stage of the single touch payroll program rolled out in a staged approach.
All Australian employers must report payroll and superannuation data using STP-enabled software. This mandatory reporting was effective from 1 July 2019.
STP Phase 2 reporting is a continuation of the single touch payroll program. STP 2 became mandatory from 1 January 2022. The main change with STP 2 is reporting of additional information to the ATO.
All employers, regardless of size, must meet STP 2 reporting requirements as of 1 January 2022. Employers must use STP approved software to share payroll and superannuation information to the ATO. ATO penalties may apply to employers that do not comply with STP2 reporting requirements.
Fortunately, the transition to STP 2 is simple and fuss-free with Payroller.
Learn how to update your employees’ details for STP 2 in Payroller with our simple user guide.
STP Phase 2 aims to streamline the interactions that employers have with the ATO.
Some examples of this include:
- You no longer need to separately send your employees’ TFN declarations to the ATO. Due to the additional information that is sent under STP Phase 2, your reporting obligations are met.
- The introduction of ‘Income Types’ in STP Phase 2 means that the ATO will be notified of concessional reporting options (i.e closely held payees)
- You no longer need to provide Lump Sum E Letters to your employee if you make a Lump Sum E Payment. You will include the amount and period it relates to in your reporting.
- You won’t need to separately send separation certificates to the ATO when an employee stops working for you. Instead, you’ll report the termination date and cessation reason through STP Phase 2.
- You have the option to report child support deductions and garnishees through STP Phase 2. This is voluntary but if you choose to do so, you won’t need to report this separately to the Child Support Registrar.
The ATO will also share the information you report through STP Phase 2 to Services Australia.
STP Phase 2 should also streamline the interactions that employees have with the ATO.
- Employees will have better visibility at tax time.
- They will have breakdowns of the types of income that they received and where it should be prefilled on their income tax return.
- They will have more insight into whether the employer is taxing them correctly, preventing them from getting taxed heavily when they do their tax return.
The information will also be shared with Services Australia to streamline the interactions that they have with their customers.
The single touch payroll (STP) data may be used to improve their services by:
- Prefilling data that is sent through STP – their customers will save time filling out claims and reports
- Reducing how often Services Australia need to contact their customers – STP Phase 2 provides them with some of the information that they currently need to confirm online or over the phone
- Streamlining claims – fewer documents will need to be provided by their customers
- Enhancing Family Tax Benefit processes – Services Australia can contact their customers via SMS or email when:
- STP data shows their family income estimate may be too low;
- they have a new job;
- their employment has changed.
- Helping them pay their customers the correct amount
- Using the STP Phase 2 information to improve the customer experience if the customer has a debt to pay. The STP Phase 2 information gives Services Australia a clear insight into their customer’s employment and income history, helping them assist customers to repay debts.
While you need to report more information about your employees, your existing reporting and payroll processes will stay the same.
The following will not change under STP Phase 2:
- The way you report.
- Reporting due dates.
- The types of payments you make.
- Tax and super obligations.
- EOFY reporting and finalisation requirements.
Disaggregation of Gross
In the first phase of STP, your payroll software sends a gross amount made up of different components and payment types.
Under STP Phase 2, these components and payment types will be reported separately to account for the different social security treatments of these payments.
This will not change how you run payroll and input these payments into your payroll software.
Employment and Taxation Conditions
To streamline the reporting of employment and taxation conditions, you will have to provide some additional information about your employees in your STP Phase 2 reports.
These pieces of information include:
- their employment basis (full-time, part-time, casual)
- the information on their TFN declaration
- the date they leave and the reason they leave.
You already provide this information through other forms of reporting (i.e. TFN declaration and employment separation certificate).
A number of details about the types of income an employee receives are already sent through STP.
However, the reporting of income types is being introduced in STP Phase 2 to better:
- identify any payments that you may make to your employees that have specific tax consequences
- make it easier for employees to complete their income tax returns
- help the ATO identify where employers are using a concessional reporting arrangement, like closely held payees. You can indicate that an individual employee is a closely held payee in Payroller with our user guide.
Depending on the income type of your employee, you may need to report a country.
Adding child support deductions & garnishees
Under STP Phase 2, you will have the option to report child support deductions and garnishees. You can add child support deductions and garnishees in Payroller with our handy user guide.
If you choose to report it through STP, you will not need to give separate remittance advice to the Child Support Registrar.
Please note that it is not mandatory to report Child Support Deductions and Garnishees through STP.