Single Touch Payroll (STP) Phase 2

Emma Koschitzke

The term STP will be a familiar term to those business owners paying employees, it was a learning curve for us all when this was introduced by the Tax Office but hopefully most businesses will be well versed in using the first phase of STP by now.

STP was a Tax Office initiative designed to streamline the reporting of employee pay, tax withheld and superannuation with the help of software providers such as Xero and MYOB.

The purpose of STP 2 is to report additional information through payroll, this information will include more detail such as income and payment types, and the reason for any cessation of employment.

The introduction of the phase 2 initiative is now underway and businesses will required to report additional information via STP 2. Businesses must comply or potentially face penalties from the Tax Office.

The original start date for STP 2 was 1 January 2022, however, most software providers have extended this deadline by 12 months to 1 January 2023.

Xero have announced they have a further extension of the start date to 31 March 2023. This gives Xero payroll users additional time to ensure their payroll records re STP phase 2 are compliant.

There is no extension at this stage for MYOB AccountRight and Essentials users and the deadline of 31 December 2022 still applies.

What are the main changes in STP Phase 2 ?

  • Employment & Taxation Conditions
    There are many factors that influence how you manage your employees in your payroll. These include:
    • their employment basis.
    • the information on their TFN declaration.
    • details of when and why they leave.

You currently provide this information in different ways and on different forms.
Phase 2 streamlines this process by including the information in your STP report.

  • Income Types
    This is being introduced to report the following more flexibly:
  • identify payments you make to your employees with specific tax consequences.
  • make it easier for them to complete their individual income tax return.
  • help us identify where you are using a concessional reporting arrangement.
  • Employee Separation Certificates
    These certificated are no longer required, as the reason why an employee has left the business will be reported via STP records
  • Lump Sum E Payments

Previously, a separate form/letter would need to be provided for this, this information will now be included in Phase 2 reporting, with details of the payment appearing on the employee’s income statement

  • Child Support

Businesses will now have the option to include child support garnishees and deductions in your STP report. This will reduce the need to give a separate remittance advice to the Child Support Register. This will be optional

  • Employment Type

This was previously optional; this will now be a mandatory field which needs to be completed

  • Disaggregation of Gross

Instead of reporting all wages as a gross amount, you will now report these in more detail. Income will no longer be reported as a gross sum, instead each component must be itemised including salary sacrifice, overtime, paid leave, bonuses, commissions, director’s fees and allowances (allowances must also be individually itemised).

  • Country Codes

If you make a payment to an Australian resident working overseas, you will need to provide information about the host country.

For more information please check with your service provider, most will have information on their website or get in touch with us here at Green Taylor Partners.