An expansion of Single Touch Payroll (STP) was announced in the 2019-20 Budget.
The amount of data required to be reported to the ATO has increased significantly. This additional reporting will assist in ensuring the correct payments to employees and reduce the number of government agencies where employers must report employee information. In addition, it will assist paying your employees correctly and on time.
How soon will Single Touch Payroll Phase 2 begin?
Single Touch Payroll Phase 2 started for some very large employers on 1 March 2022.
Where your digital service provider (DSP), e.g. Xero, needs more time to update their solutions and make changes, they can apply for a deferral. In such a case, the deferral automatically applies to customers of that particular provider as well. According to Xero, their deferral will expire on 31 March 2023. The deadline for reporting the first STP Phase 2 pay run for all customers using Xero Payroll is also set at that date.
It is possible to extend your deferral beyond your software provider’s deferral if your business requires more time to transition. Delays in transition can be applied for from December 2021. The application process will also be open to registered agents. More information will be available in the near future, according to the ATO.
Phase 2 of the STP entails what?
Data collection for Single Touch Payroll Phase 2 expands to include a wider range of information each pay period. Tax law has been amended to make it mandatory for employers to separate the components of gross wages. This will make it easier for employees to complete their tax returns. Also, Services Australia will be able to identify various types of income that will be used in the administration of their programs.
For the purpose of assisting employers in meeting their obligations, the ATO intends to obtain this additional information in order to validate PAYG Withholding amounts as well as estimate superannuation guarantee amounts.
It is now necessary to separately itemize the following components of gross earnings:
· Allowances (sorted into specific categories)
· Paid leave (classified by specific leave types)
· Overtime
· Bonuses and commissions
· Directors’ fees
· Lump sum payments and employee termination payments (classified by type)
· Salary sacrifice and deduction amounts (sorted into specific categories).
· and a category for all other amounts.
STP Phase 1 reported less gross earnings due to salary sacrifice amounts, whereas STP Phase 2 now separates these earnings. Also, certain allowances that are reported separately under Phase 1 of STP will be reported more extensively in Phase 2 to allow for a better understanding of how employees are paid.
STP Phase 2 also captures the following data:
· Employment status of the employee (full-time, part-time, casual, labour hire, non-employee),
· Tax treatment of employees (applicable tax scale, options within tax scale, STSL status, Medicare Levy options, tax variation)
· Reason for termination of an employee (voluntary termination, redundancy, dismissal, contract termination, transfer, ill health or death)
· Identify the type of income and country codes (closely held payees, inbound assignees, working holiday makers, Australian citizens working abroad, and labour hire).
Which aspects remain the same?
· There is no change in tax and superannuation obligations
· There are no changes to the types of payments required
· STP data is lodged in the same manner as before, along with the due dates for finalization at the end of the year
· An activity statement must be prepared and lodged (where applicable).
With our expertise in STPR requirements, our business advisers can assist you in navigating and maximizing the benefits of these changes. If you would like more information, please do not hesitate to contact a member of our team.
