Most employers would now be experts in reporting Single Touch Payroll (STP), which is great news! The ATO introduced the expansion of STP, known as STP Phase 2, to include additional information and reduce reporting burdens for employers who need to report information about their employees to multiple government agencies and reduce the administrative tasks associated with the hiring and termination of employees. With Phase 2 having begun on the 1st of January 2022, this article will summarise the changes and what you will report to the ATO.
What is not changing?
Before we go into the detail of the additional information that will need to be reported through STP Phase 2, let's clarify what is not changing:
- The way you lodge events, regardless of whether you are lodging as an employer, intermediary or a registered tax agent.
- The due date for lodging events.
- The payments that are needed.
- Tax and super obligations.
- End of year finalisation requirements.
What is changing?
The biggest change with introducing STP Phase 2 is the additional reporting requirements of employee and earnings data. The key reporting changes are:
- Disaggregation of gross.
- Employment and taxation conditions.
- Child support garnishees/deductions.
- Income types and country codes.
- Lump sum E payments
Disaggregation of gross
In Phase 1 of STP, the gross amount reported contained different amounts depending on the particular income type. However, with Phase 2, all payment types are now required to be reported for each income type. You should report all employee remuneration that is reportable through STP, and not separately itemised, as Gross earnings.
Reporting salary sacrifice is a new requirement being introduced in Phase 2, which means the gross amount reported will be the pre-sacrificed amount. You need to disaggregate (report separately) the following payments:
- Bonuses and commissions.
- Directors' fees.
- Paid leave.
- Salary sacrifice.
To read further information on the reporting guidelines on the amounts paid to employees, you can refer to the ATO’s website.
Employment and taxation conditions
You will now report directly via STP the information you provide to the ATO and other government agencies through various submission forms. This will streamline your reporting processes and save you time managing your ATO commitments.
This means that employers will no longer need to send TFN declarations to the ATO or provide employment separation certificates when an employee ceases employment. You will need to submit the required information through STP instead.
The following fields relate to the employment relationship between the employer and the employee, as well as the taxation conditions of the employee to identify withholding tax rates:
- Employee's commencement date.
- Employee's cessation/termination date.
- Employment basis cessation/termination reason.
- Tax treatment.
An employee’s commencement date and termination date are existing fields that were already reported on as part of STP Phase 1, however employment basis, cessation/termination reason and tax treatment are new mandatory fields.
You no longer need to lodge a tax declaration with the ATO and instead, you will report your employees' tax treatment to the ATO via STP. Current STP Tax Categories:
- Working Holiday Makers.
- Seasonal Worker Programme.
- Foreign Resident.
- No TFN.
- Voluntary Agreement.
New STP Tax Categories:
- Horticulturists and Shearers.
- Seniors and Pensioners.
- ATO Defined.
- Daily Casuals.
You will also need to report Study and training support load (STSL) Status and Medicare Levy through STP Phase 2. Please note:
- New employees will still need to complete a Tax File Number (TFN) declaration and the employer must keep this for their records.
- Existing employees do not need to complete a new Tax File Number (TFN) declaration to report through STP Phase 2.
Child support garnishees/deductions
STP Phase 2 has introduced the ability to report on child support garnishees and deductions through STP, however, reporting on child support through STP is voluntary. Reporting though STP will remove the need for employers to provide separate remittance advice to the Child Support Registrar.
Although STP Phase 2 makes it easier to report on child support garnishees/deductions, you must still pay the required amounts directly to the Child Support Registrar by the date specified in your notice.
Income types and country codes
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 codes, please refer to the ATO website.
Lump sum E payments
STP Phase 1 did not support recording the financial year to which the lump sum payment related to. This meant that employers were still required to issue lump sum E letters to their employees, specifying the financial year(s) the amount accrued. Phase 2 supports the reporting of the financial year and you will record this at the time of processing the lump sum payment for the employee.