Phase two of The ATO’s Single Touch Payroll (STP) reporting regime is due to come into effect on 1 January 2022. STP 2.0 is expected to bring the greatest amount of complexity since the regime was introduced in July 2019. Find out more about STP 1.0 here.
STP 2.0 requires employers to provide more detailed payroll information to the ATO than ever before – the Government anticipates that this will reduce the burden of reporting to other Government agencies.
When does STP 2.0 come into effect?
The major accounting software suppliers including Xero and Reckon will contact you regarding their planned software upgrades to deal with STP 2.0.
If your chosen software is ready by 1 January 2022, you will be expected to transition to STP 2.0 by 1 March 2022. If the ATO has granted your software supplier a deferral – this deferral will automatically apply to all users. If you’re unsure if your software supplier has been granted a deferral, please contact us.
Employers may apply for individual deferrals from December 2021.
Key changes
Reporting of new information
Employers must now report:
- A TFN or ABN for each payee (or a valid exemption code)
- Employee commencement date
- Employee cessation date and reason for cessation
- Employment basis (Full time, Part time, Casual etc)
- Tax treatment – using the codes suppled in your STP solution, and
- Income types – to be assigned to each payment made to employees.
Disaggregation of gross earnings
Under the current reporting regime most earnings are reported as gross wages, STP2.0 requires that payments be reported separately as:
- Gross
- Paid leave
- Allowances
- Overtime
- Bonuses and commissions
- Directors’ fees
- Lump sum return to work payments, and
- Salary sacrifice payments.
Exempt foreign employment income
Any amount you pay to an employee that is exempt foreign employment income must be reported as exempt foreign employment income even if it is the only income paid to the employee for the financial year.
Reporting of unused leave and employee termination payments
There are a number of changes to the reporting of employment termination payments and lump sums of unused leave. For example, the tax-free amount of genuine redundancy payments is now reportable.
Child support garnishees and child support deductions
- Employers can include child support garnishees and deductions in STP reports which will reduce the administrative need to provide separate remittance advices to the Child Support Registrar.
Full details on the new reporting requirements of STP 2.0 can be found here.
Your next steps
The time needed to prepare for STP 2.0 should not be underestimated. Practical steps you can undertake now include:
- Review each of your wage payments and map them to the disaggregated disclosure items (more detailed definitions can be found here).
- Map each of your payees to an income type and tax treatment, and ensure you have valid TFNs or ABNs for each.
- Review the superannuation, PAYG and payroll tax treatment for each wage payment.
- Review your employee onboarding process -are you capturing the necessary information?
