Single Touch Payroll (STP) Phase 2

Single Touch Payroll (STP) Phase 2 is the continuance of the first phase of STP. It aims to reduce employer admin by reducing the amount of duplicate employee information businesses provide to different government agencies.

• Disaggregation of gross – You will now need to separately associate and report each of the payroll categories that make up an employee's of gross salary against a code, including gross salary, paid leave (including paid parental leave), overtime, bonuses, allowances, commissions, director fees, lump sum W payments and salary sacrifice amounts.
• Tax file number declarations – Although optional, you no longer need to send through employee Tax File Number declarations. This data will now be part of your STP reporting via an automated tax treatment code for each employee.
• Termination reason – If someone leaves your business, you will need to provide a reason in your STP report. This means no more employee separation certificates.
• Child support garnishee/deductions – You now can include child support garnishes and deductions in your STP report. This reduces the need to submit separate reports to agencies every month.
• Employment and payment types – You will now need to specify an employee’s work type, including whether they are full-time, part time or casual. You will also need to assign each employee payment an income type (e.g. salary and wages, closely held payees etc.)
• Lump Sum E payments – If you make a Lump Sum E payment, you no longer need to send letters to your employees.
• Salary sacrifice – Salary sacrifice amounts now need to be included in your STP report from Phase 2.
• Switching payroll systems – If you decide to switch to another payroll software, the ATO can link the BMS ID/payee ID from your previous payroll platform to the ID generated by the new platform.

STP Phase 2 commenced 1st January 2022. The Australian Taxation Office has also confirmed there won’t be penalties for genuine mistakes made under STP Phase 2 reporting until 31 December 2022.

foundU was granted a deferral by the Australian Taxation Office until February 2023, which covers all of our existing customers. However, we have been preparing for STP Phase 2 for a while now and are building out new functionalities to make it easier for customers.

There are exemptions for certain types of employers. If your business has a withholding payer number (WPN), you are exempt from STP reporting from 2018-2023.  However, you will need to start reporting payments through STP from 1 July 2023.

In addition, small businesses with 19 or fewer employees may be exempt from STP reporting if:

• They have no or low digital capability
• They have no or unreliable internet service
• They meet other special circumstances determined by the Australian Taxation Office

If your business reports through STP, it means that your employees' income, tax and super will be reported in real-time. There are no changes to the way they are paid, just the way that your business reports payments. 

Employees will also be able to:

• Find their tax and super information online via the ATO
• See up-to-date tax and super information each time they are paid
• Receive an income statement (previously known as payment summary or group certificate) at the end of each financial year
• Check if their super has been paid
• Give their registered tax agent instant access to their income statement for tax returns

The ATO only accepts payroll data from STP-approved payroll providers. This means it is impossible for businesses to set-up or lodge their STP manually.

In order for your employees to receive a tax refund, your business will need to lodge an end of year STP finalisation event. This process involves:

• Checking your payroll reports to confirm that everything has been reported correctly to the ATO
• Informing the ATO that you've completed all pays for the payroll year
• The status of your employees' income statements in myGov changing to 'tax ready' for them to lodge their tax returns