While Single Touch Payroll (STP) entered Phase 2 on 1 January 2022, many employers might not yet be reporting the additional information required under this phase because their digital service providers (DSPs) have obtained deferrals for time to get their software ready and help their customers transition. However, once these deferrals expire, employers will need to start reporting additional information in their payroll software such as tax file numbers (TFNs) or Australian business numbers (ABNs) for payees, employment start dates for employees and details about employees’ basis of employment according to work type. Income and allowance information for individual employees will be further disaggregated and will also require reporting of more details.
Essentially, STP works by sending tax and super information from an STP-enabled payroll or accounting software solution directly to the ATO when the payroll is run. Entering STP Phase 2 means that additional information which may not be currently stored in some employers’ payroll systems will need to be reported through the payroll software. A salient example is the start date of employees. While many newer businesses may have that information handy, older businesses may have trouble finding records of exact start dates, particularly for their long-serving employees. In those instances, the ATO notes that a default commencement date of 01/01/1800 can be reported for STP Phase 2 purposes.
Employers will also be required to report either a TFN or an ABN for each payee included in STP Phase 2 reports. Where a TFN is not available for an employee, a TFN exemption code must be used. If a payee is a contractor and an employee within the same financial year, both their ABN and their TFN must be reported.
In addition to reporting TFNs and commencement dates for employees, employers are now also required to report the basis of employment according to work type. That is, whether an individual is full-time, part-time, casual, labour hired, has a voluntary agreement (is a contractor with their own ABN but is in a voluntary agreement with the business to bring payments into the PAYG system), a death beneficiary, or a non-employee (ie not in the scope of STP but included for the voluntary reporting of superannuation liabilities).
The report generated for STP Phase 2 will include a six-character tax treatment code for each employee, which is a shortened way of indicating to the ATO how much should be withheld from payments to these employees. Most STP solutions will automatically report these codes, but employers should still understand what the codes are to ensure that they are correct. For example, RTSXXX refers to regular (R) employees with a tax-free threshold (T), who have study and training support loans (S) and who have not asked for a variation of amount withheld due to Medicare levy surcharge (X) or Medicare levy exemption (X), or Medicare levy reduction (X).
The income and allowance details attributed to employees will also be further drilled down in Phase 2. For example, instead of reporting a single gross amount of employees’ income, employers need to separately report on gross income, paid leave, allowances, overtime, bonuses, directors’ fees, return to work payments (lump sum W) and salary sacrifice amounts.
If your DSP has a deferral in place, you do not need to apply for your own deferral and will only need to start reporting STP Phase 2 information from your next pay run after your DSP’s deferral expires. However, if your business needs more time in addition to your DSP’s deferral, you can apply for your own deferral using ATO Online Services.
Source: www.ato.gov.au/Business/Single-Touch-Payroll/Expanding-Single-Touch-Payroll-(Phase-2)/
www.ato.gov.au/Business/Single-Touch-Payroll/Need-more-time/STP-expansion-(Phase-2)-delayed-transitions/