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The 2019-20 Budget saw the government's announcement of the inclusion of additional information in Single Touch Payroll (STP). This expansion, commonly referred to as STP Phase 2 (STP Phase 2), aims to lessen the reporting requirements for employers who need to submit employee-related information to various government agencies. This development also benefits the customers of Services Australia, who could potentially be your employees, by ensuring timely and accurate payment.
According to the Australian Taxation Office (ATO), there are multiple benefits to both employers and employees that stem from Single Touch Payroll Phase 2.
Employers can benefit from the implementation of STP Phase 2 by streamlining their interactions with the ATO in the following ways:
Phase 2 includes changes that can help the ATO streamline interactions for employees, such as:
The majority of the supplementary information required for the STP report should already be recorded in your existing payroll software.
The main modifications to the STP report comprise:
Your current STP report comprises a lump sum amount that includes various components and payment categories. However, due to the differing treatment of certain components for social security purposes, you are now required to provide a more detailed report.
When managing your employees in payroll, various factors come into play, such as their employment basis, Tax File Number declaration information, and reasons for leaving. Currently, you provide this data in various formats and through different forms.
However, Phase 2 simplifies this process by integrating the information into your STP report. In Single Touch Payroll Phase 2 (STP Phase 2), employee tax information will be integrated through STP reporting, thereby eliminating the requirement to submit tax file declarations separately to the Australian Taxation Office (ATO).
Your STP report currently includes information about the type of income your employees receive. With the introduction of income types reporting in Single Touch Payroll Phase 2 (STP Phase 2), you will be able to specify payments made to your employees with particular tax implications. This will make it more convenient for them to complete their individual income tax returns and assist the Australian Taxation Office (ATO) in identifying where you are using a concessional reporting arrangement.
At times, it may be necessary to include a country code in your report. This may be the case when making a payment to an Australian resident who is working outside the country, and you are required to provide details of the host country.
You will be provided with the choice to add child support garnishees and deductions to your STP report. Doing so will diminish the requirement of presenting separate remittance advices to the Child Support Registrar.
It is worth noting that this feature is optional, and not all STP-enabled solutions will provide this functionality.
You may be given the choice to provide the Australian Taxation Office (ATO) with your previous Business Management Software IDs and Payroll IDs in your STP report, especially when you've altered your business structure or software and are unable to finalise or zero out previous records.
By providing this data, the Australian Taxation Office (ATO) can rectify any duplicate income statements for your employees in ATO online services and minimise errors.
It is important to note that not all STP-enabled solutions will provide this feature, and it is optional.
Although there are additional details that need to be included in your STP report, several aspects will remain unchanged, including:
The mandatory start date employers need to initiate Single Touch Payroll Phase 2 reports by is 1 January 2022. However, employers who need more time to gather the necessary data for Phase 2 can request approval to comply.
According to the Australian Taxation Office (ATO) penalties will not be incurred for genuine mistakes in your first year of STP Phase 2 reporting.
Additional reporting requirements for work types and disaggregating gross incomes are added, and country codes are included.
The implementation of Single Touch Payroll (STP) has become a mandatory requirement for companies that withhold PAYG contributions from their employees. Phase 2 of STP also remains mandatory. However, a freelancer who does not have any employees is not obligated to comply with the STP requirement.
This change will require an initial minor modification to the payroll system for all employers. The extent of additional reporting required will depend on factors such as the size of the business, its structure, employee types, and the existing systems in place.
If you need assistance implementing STP Phase 2 or are having trouble with managing employee's pay, including: employee records, tracking paid leave, overtime bonuses, or general payroll data issues, you should seek professional advice
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Any advice contained in this document is general advice only and does not take into consideration the reader’s personal circumstances. Any reference to the reader’s actual circumstances is coincidental. To avoid making a decision not appropriate to you, the content should not be relied upon or act as a substitute for receiving financial advice suitable to your circumstances.
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