Updated: Mar 22
In the 2019-20 Budget, the Federal Governed announced that they would be expanding Single Touch Payroll (STP).
This expansion, known as STP Phase 2, aims to reduce the reporting burden on employers that need to report information about their employees to multiple government agencies.
STP Phase 2 will also help Services Australia issue the correct payment to their customers who may also be your employees.
The scheme officially begins on 1 January 2022. However, all Payroller users have an extension until 30 June 2022.
In this article
Benefits for employers
STP Phase 2 aims to streamline the interactions that employers have with the ATO.
Some examples of this are:
You no longer need to separately send your employees' TFN declarations to the ATO. Due to the additional information that is sent under STP Phase 2, your reporting obligations are met.
The introduction of 'Income Types' in STP Phase 2 means that the ATO will be notified of concessional reporting options (i.e closely held payees)
You no longer need to provide Lump Sum E Letters to your employee if you make a Lump Sum E Payment. You will include the amount and period it relates to in your reporting.
You won't need to separately send separation certificates to the ATO when an employee stops working for you. Instead, you'll report the termination date and cessation reason through STP Phase 2.
You have the option to report child support deductions and garnishees through STP Phase 2. This is voluntary but if you choose to do so, you won't need to report this separately to the Child Support Registrar.
The ATO will also share the information you report through STP Phase 2 to Services Australia.
This means you and your employees won't need to send employment and payroll information separately to Services Australia.
Benefits for employees
STP Phase 2 should also streamline the interactions that employees have with the ATO.
Employees will have better visibility at tax time. They will have breakdowns of the types of income that they received and where it should be prefilled on their income tax return.
They will have more insight into whether the employer is taxing them correctly, preventing them from getting taxed heavily when they do their tax return.
The information will also be shared with Services Australia to streamline the interactions that they have with their customers.
The STP data may be used to improve their services by:
prefilling data that is sent through STP - their customers will save time filling out claims and reports
reducing how often Services Australia need to contact their customers - STP Phase 2 provides them with some of the information that they currently need to confirm online or over the phone
streamlining claims - fewer documents will need to be provided by their customers
enhancing Family Tax Benefit processes - Services Australia can contact their customers via SMS or email when: (1) STP data shows their family income estimate may be too low, (2) they have a new job, (3) their employment has changed.
helping them pay their customers the correct amount
using the STP Phase 2 information to improve the customer experience if the customer has a debt to pay. The STP Phase 2 information gives Services Australia a clear insight into their customer's employment and income history, helping them assist customers to repay debts.
What isn't changing under STP Phase 2
While you need to report more information about your employees, your existing reporting and payroll processes will stay the same.
The following will not change under STP Phase 2:
the way you report
reporting due dates
the types of payments you make
tax and super obligations
EOFY reporting and finalisation requirements
Disaggregation of Gross
In the first phase of STP, your payroll software sends a gross amount made up of different components and payment types.
Under STP Phase 2, these components and payment types will be reported separately to account for the different social security treatments of these payments.
This will not change how you run payroll and input these payments into your payroll software.
Your payroll software provider will simply report these payment types separately rather than combining them and reporting a single gross amount.
Employment and Taxation Conditions
To streamline the reporting of employment and taxation conditions, you will have to provide some additional information about your employees in your STP Phase 2 reports.
These pieces of information include:
their employment basis (full-time, part-time, casual)
the information on their TFN declaration
the date they leave and the reason they leave.
You already provide this information through other forms of reporting (i.e. TFN declaration and employment separation certificate).
When you report this information through STP Phase 2, you will no longer need to report these separately through other means.
A number of details about the types of income an employee receives are already sent through STP.
However, the reporting of income types is being introduced in STP Phase 2 to better:
identify any payments that you may make to your employees that have specific tax consequences
make it easier for employees to complete their income tax returns
help the ATO identify where employers are using a concessional reporting arrangement, like closely held payees.
Depending on the income type of your employee, you may need to report a country.
For example, if the employee is a part of the Working Holiday Maker scheme, you will need to report their home country.
Child Support Deductions and Garnishees
Under STP Phase 2, you will have the option to report child support deductions and garnishees.
If you choose to report it through STP, you will not need to give separate remittance advice to the Child Support Registrar.
Please note that it is not mandatory to report Child Support Deductions and Garnishees through STP.