Single Touch Payroll (STP) has been expanded to reduce the pressure on employers who are required to report employee information to a variety of government agencies.
The first phase of STP has been a mandatory obligation for all business that withheld PAYG contributions for employees or contractors since 1st July 2019. Phase 2 is a continuation of STP and also remains mandatory.
Phase 2 of the STP initiative is now underway. Since 1st January 2022, businesses are required to report additional information via STP, eliminating existing reporting requirements in some instances.
The expansion of the Single Touch Payroll (STP) scheme changes reporting requirements for employers when it comes to what information they give to the ATO regarding their payroll.
Similarly to STP, STP Phase 2 has some impact on all businesses that employ staff. These changes and impacts are covered in this article.
Business owners must comply with STP Phase 2 or potentially face penalties from the ATO.
However, it is important to note that sole traders and freelancers that do not employ others do not need to comply with STP requirements.
STP Phase 2 introduces changes that reduce reporting requirements across the following four areas.
Tax File Number Declarations – Information collected from TFN declarations – including the TFN itself, employment type and whether the employee has a HECS-HELP debt is to be included in STP reports and the declaration itself will no longer need to be sent to the ATO.
Employee Separation Certificates – These certificates are no longer required, as the reason why an employee has left the business will now be provided via STP reports.
Lump Sum E Payments – Previously, if an employer makes a payment owing from previous years a Lump Sum E letter would need to be provided to the employee. This information must now be included in Phase 2 reporting, with details of the payment appearing in the employee’s income statement.
Child Support – Businesses will have the option to include child support garnishees and deductions in their STP report, reducing the need to provide separate advice to the Child Support Registrar. (Please note: this option is not yet available in MYOB products.)
Furthermore, reporting requirements are introduced for employment type, disaggregation of gross income and the inclusion of country codes as per the below.
Employment Type – This was previously optional, reporting of employment type will be mandated under Phase 2 reporting. Employers will now be required to declare whether their employees are full-time, part-time or casual, in addition to new categories such as labour hire or volunteer.
Disaggregation of Gross – Under the new changes 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 have Australian resident employees who are working overseas, businesses will need to provide details of the host country.
Furthermore, it is important to note that the way an employers submits their STP report, the due date and the end-of-year finalisation declaration for each employee will not change. Tax and superannuation details will still be required as usual.
For employers and their advisors, it is vital for you to make sure that you familiarise yourself with STP2 requirements and specifically, how they impact your reporting requirements.
Making time for an in-depth discussion between key decision makers and key advisors will be a hugely important aspect to this. Employees should also be included in the discussion once a clear view of the individual organisation’s requirements has been determined.
From that point on, preparation becomes a case of implementing a plan that will step you towards your compliance deadline.
For MYOB’s customers, the software provider is currently updating its software in advance of these changes and has already begun rolling them out in products, allowing businesses and their advisors the ability to begin uploading new information.
The team at Vault are here to help. We offer the full suite of financial products and advice to help you navigate the business landscape. Schedule a meeting here via Calendly or give us a call on 1300 1 VAULT (1300 182 858).