Disclaimer: The information in this article is only of general nature and specific advice should be sought from either registered tax or BAS agent. The information contained in this article is current as at July 12, 2021 and may have been subsequently changed by the Australian Taxation Office (ATO).
Expanded STP Phase 2 will require employers to consider the following:
- What do I as the employer need to change to comply with Phase 2;
- Do I need involvement with my registered tax or BAS agent?
- Do the persons processing the payroll understand the changes to STP such as:
- Paying employees correctly;
- Calculating employee superannuation entitlements correctly;
- Addressing overpayments correctly;
- Maintaining accurate information, including names, addresses and date of birth records.
- When do I discuss the changes with the staff?
- Employee payment summary will not be provided and that information will be available through myGov or their tax professional;
- STP reports are still due on or before pay day unless you are eligible for a reporting concession;
- The types of payments that are in-scope of STP reporting;
- Taxation and superannuation obligations;
- End of year finalisation requirements.
Expansion of STP Phase 2
STP-enabled payroll or accounting software sends information to the ATO as you run the payroll, reducing the requirement for an employer to report information to multiple government agencies.
The current mandatory start date for STP Phase 2 is January 1, 2022. Employers’ reporting responsibilities will change as additional information will be required on or before each pay day.
What you will need to do will depends on the product you use and how you manage your payroll.
Key Features of STP Phase 2
The Australian Government states the key benefits and features of Phase 2 include:
- Reduction of duplicated information employers provide to government will reduce unnecessary interaction including:
- Incorporating the reason for an employee ceasing employment to reduce the need for separation certificates;
- Reporting child support garnishee and deduction amounts voluntarily through STP instead of through the separate manual remittance process.
- Removing the need to send tax file number and withholding declaration information to the ATO. Information will now be captured in the employment condition section of the STP report;
- Better defining the components that make up gross income that will:
- Make it easier for employers to understand their obligations;
- Help employees understand their earnings and help them with their interactions with Services Australia;
- Ensure consistency of reporting across the various types.
- Reporting employee payments by income type (or income streams) including:
- Salary and wages;
- Foreign employment income;
- Closely held payees;
- Working holiday maker.
Changes to STP reported Gross Amount
Social security require changes to the gross amount. The following will be separated excluded from the gross amounts:
- Bonuses and commissions;
- Director fees;
- Paid leave;
- Salary sacrifice.
All allowances will be reported separately and the STP report will include the following additional information:
- Cents per kilometre vehicle costs;
- Overtime meals;
- Qualifications and certificates
The type of employees paid leave will be required for STP reporting. Below are types of paid leave your STP reports will include:
- Ancillary—jury service, service with local fire or emergency authorities or Defence leave;
- Cash out of leave in service leave entitlements
- Other paid leave—annual leave, leave loading, long service leave and personal leave;
- Workers’ compensation—includes hours not worked (or not attending work as required) of if employment has been terminated.
Superannuation guarantee law changes that applied from January 1 2020 in relation to salary sacrifice contributions do not allow salary sacrifice to be used for:
- Reduction in ordinary time earnings;
- Count towards your minimum superannuation guarantee obligations.
Employers will be required to report salary sacrifice amounts in the STP reports in a choice of two new fields;
- Other employee benefits;
Employees who sacrifice 100 per cent of their payments will be included in the STP report.
Extra information will required for:
- Cessation date and reason—reduce need for separation certificate;
- Employment basis:
- Full time, part time or casual;
- Labour hire worker;
- Working under a Voluntary Agreement for withholding;
- A death beneficiary;
- A non-employee—a person who is not within the scope of STP for payments but may be voluntarily included in STP for superannuation liability reporting only.
An employees’ pay as you go withholding is based on the TFN declaration and information the employer knows about them. Some extra reporting each pay day will assist the ATO to identify the factors that have influenced how the employer has calculated the Pay As You Go (PAYG) withholding.
The STP report will contain the following information:
- Are claiming the tax-free threshold;
- Have a Medicare levy exemption;
- Have notified you that they have a Study and Training Support Loan
Lump sum payments will be categorised as:
- Lump sum E—must be now included in your STP report before finalising your employee’s records. May remove the need to provide lump sum E letters;
- Lump sum W—Return to work payment. Previously these were included in gross, however under Phase 2 these will be reported separately as a lump sum.
Superannuation funds will be required to report when the employer has made the super payment to the employees’ chosen or default fund.
Employers must understand that this matching process will be an important step towards employees are paid their correct entitlements.
The ATO systems will match the STP information to employer and employee records.