You need to assign each payment you make to an employee as an income type and, sometimes, a country code alongside that income type. By reporting on income types it assists the ATO with identifying different tax and reporting scenarios, such as:
- The employee’s income may have a different tax behaviour, for e.g. working holiday makers.
- Concessional reporting arrangements for, e.g. closely held payees.
- Clarifying the employer's reporting obligations regarding foreign tax and whether there are any applicable tax treaties in place with a foreign country.
To read further information on income types and country code requirements, please refer to the ATO's website.
How we support this change
We have added new settings to the employee profile to ensure the correct income type and country code assignment when reporting under STP Phase 2 specifications.
We have added a new Employee Income Type drop-down on the Employee Details page of Onboarding Workflow module. You can use this new feature to select the employee's income type for new employees joining your business.
Helpful Hint
Unless otherwise identified, you would classify most employees as salary and wages. This is the most common income type.
Helpful Hint
If the income type selected is Working Holiday Maker, you may help the employee complete the home country. However, this is not a mandatory field by the admin, as the employee would complete it in their tax declaration page.
We have added a new Employee Income Type drop-down on the Employee Pay Run Details page within the Employee File module. You can use this new feature to select the employee's income type of existing employees within your business.
Important
Some income types selected in Employment Hero will appear as Not Applicable in the Payroll classic platform. We base this on reporting requirements to ATO for STP Phase 2.
Important
If the income type selected is Foreign Employment, you will need to select the host country where the employee is working. Please ensure you assign this employee to a location in a foreign country. You can manage locations on Employment Hero's Payroll classic platform, as explained on this article.
Important
If the income type selected is Inbound assignee to Australia, you will need to select the country of the foreign (offshore) employing entity. Please ensure you assign this employee to a foreign (overseas) entity on Employment Hero Payroll classic.
Important
If income type selected is Closely Held Employee, you will need to choose the reporting option you want to use for this employee in Employment Hero's Payroll classic platform. The two options are to report the employee on a quarterly basis or on each pay run. To read more information on options for reporting amounts paid to your closely held payees, please refer to the ATO website.