You need to be aware of a key change affecting your employees and the way their pay information is reported to the ATO. Your payroll software will need to be reviewed and settings for employees updated by the 31st March 2023.
WHAT IS STP PHASE 2?
Under Single Touch Payroll Phase 2, the Australian Government will require all employers to report additional information through STP. This information will include details such as income or payment type and the reason for any cessation of employment.
These STP changes are intended to benefit both employers and employees – especially with streamlining things at tax time each year so employees have correct information and can receive any tax refunds faster and Services Australia will always have up to date information.
All Australian businesses that have employees on their payroll will be impacted by this change.
STP PHASE 2 CHANGES
Under STP Phase 2, you need to report additional information to the ATO using your payroll software. The main changes are:
Tax File Number Declaration:
Employers are currently required to submit a tax file number declaration to the ATO. STP Phase 2 will incorporate employee tax information via STP reporting, which eliminates the need to submit tax file declarations to the ATO as a separate process.
Specifying a reason for termination will be mandatory when an employee finishes their employment. This eliminates the need to provide an employment separation certificate.
Paid leave won't be included as part of gross earnings when reporting earnings via STP and will be reported separately.
You will now need to report all allowances separately in your STP Phase 2 report across most income types. This means that allowances previously reported as gross must now be separately itemised and reported.
Bonuses and Commissions
There might be times when you pay some employees bonus and commission payments, which are typically paid as a lump sum. Previously they were reported as part of gross payments, but for STP Phase 2 they will be reported separately.
If you pay directors’ fees, you must separately include these in your STP Phase 2 report. Director's fees include payments to:
- The director of a company
- A person who performs the duties of a director of the company; or
- A member of the committee of management of the company, or as a person who performs the duties of such a member if the company is not incorporated.
Important: To avoid penalties and ensure you are compliant with STP requirements, login to your software provider and ensure you have completed all action points.
Need help? In 2022, we hosted 2 webinars on STP Phase 2 including in depth information and a live demonstration on how to ensure you are compliant with the new reporting requirements within Xero. A recording of these webinars can be viewed here.
If you require additional assistance, please contact our office and we will be happy to assist you or answer any questions you may have.