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Single Touch Payroll (STP) Phase 2

In the 2019-20 Budget, the government announced that Single Touch Payroll (STP) would be expanded to include additional information.

The expansion of STP, also knowns as STP Phase 2, will reduce reporting burden for employers who need to report information about their employees to multiple government agencies. It will also help Services Australia’s customers, who may be your employees, get the right payment at the right time.

The mandatory start date for Phase 2 reporting was 1 January 2022, however most Digital Service Providers (DSP) have a deferral in place with the ATO until 31 December 2022.

You can apply for more time past your DPS’s deferral if you need more time to transition. As your registered tax agent, we can also apply for a deferral on your behalf.

Benefits of STP Phase 2

Benefits for employers

STP Phase 2 information will be used to streamline employer interactions. For example:

  • You’ll no longer have to send your employees’ tax file number (TFN) declarations to the ATO. Your employees will provide it to you, and you’ll need to keep it with your employee records.
  • If you’re using a concessional reporting option, such as for closely held payees or for inbound assignees, you’ll be able to tell the ATO through reporting income types.
  • If you make a Lump sum E lump sum payment, you won’t need to provide Lump sum E letters to your employees. You’ll have included the amount and the period it relates to.
  • If you change software or your employee’s payroll ID, you can tell us in your STP report if your solution has this functionality. This will help fix issues with duplicate income statements for employees in ATO online services through myGov.

The ATO will also share payroll information you report in near real-time with Services Australia who will use it to streamline requests:

  • for you to provide or confirm employment and payroll information about your employees.
  • from your employees to provide employment and payroll information such as pay slips for prior periods.

You may no longer need to provide separation certificates when your employees leave. The date and reason an employee leaves will be in your STP report.

You can also voluntarily report child support deductions or garnishees (or both) through STP. This reduces the need to send separate remittance advices to the Child Support Registrar.

Benefits for employees

Some changes under Phase 2 will help the ATO streamline interactions for employees, such as:

  • Making it easier for employees at tax time as the ATO will have better visibility of the types of income employees have received and where it should be pre-filled on their individual income tax return.
  • Over time, the new information reported will allow the ATO determine whether employees have provided employers with incorrect information that may lead to them getting a tax bill. For example, where an employee hasn’t notified you that they have a study and training support loan.

The ATO will also share STP information with Services Australia so they can streamline interactions with their customers. Over time, they’ll use STP data to improve their services by:

  • pre-filling details they already know – saving their customers time filling out claims and reports.
  • reducing how often they’ll need to contact customers – STP will give them some information that they currently need to confirm by phone or online.
  • streamlining claims – their customers won’t need to supply as many documents.
  • enhancing Family Tax Benefit processes – by sending SMS and email messages to their customers when:
    • STP data shows their family income estimate may be too low.
    • they have a new job.
    • their employment has changed.
  • helping them pay their customers the right amount.
  • using STP information to improve the customer experience if a customer has debt to pay. STP information allows Services Australia to understand their customers’ recent employment and income history – this helps them assist customers to repay any money owed.

What isn’t changing

While you’ll need to report additional information in your STP report, there are many things that will stay the same, such as:

  • the way you lodge.
  • the due date.
  • the types of payments that are needed.
  • tax and super obligations.
  • end-of-year finalisation requirements.

Key changes

Most of the additional information you need to report should already be captured in your current payroll software.

The key changes to the STP report include:

Disaggregation of gross

Your STP report currently includes a gross amount. This is the total of many different components and payment types. Because some of these are treated differently for social security purposes, you will now need to report more detail.

See Disaggregation of gross.

Employment and taxation conditions

There are many factors that influence how you manage your employees in your payroll. These include:

  • their employment basis.
  • the information on their TFN declaration.
  • details of when and why they leave.

You currently provide this information in different ways and on different forms.

Phase 2 streamlines this process by including the information in your STP report.

See How to report employment and taxation information through STP Phase 2.

Income types

You already tell the ATO about the type of income your employees receive in your STP report.

The reporting of income types is being introduced in Phase 2 to more flexibly:

  • identify payments you make to your employees with specific tax consequences.
  • make it easier for them to complete their individual income tax return.
  • help the ATO identify where you are using a concessional reporting arrangement.

Country codes

Sometimes you’ll need to report a country code. For example, if you make a payment to an Australian resident working overseas, you’ll need to provide information about the host country.

Child support garnishees and child support deductions

You’ll have the option to include child support garnishees and deductions in your STP report. This will reduce the need to give separate remittance advices to the Child Support Registrar.

This is optional and not all STP-enabled solutions will offer this functionality.

Find out more at Child support reporting.

Reporting previous Business Management Software IDs and Payroll IDs

You may have the option to provide the ATO with previous Business Management Software IDs and Payroll IDs in your STP report. This might occur when you’ve changed your business structure or changed software and can’t zero out or finalise previous records.

Providing this information will help the ATO reduce and fix issues with duplicate income statements for employees in ATO online services.

This is optional and not all STP-enabled solutions will offer this functionality.

What’s next

Your DSP will update their STP-enabled software to offer Phase 2 reporting. When your STP-enabled solution is ready, your DSP will let you know what you need to do.

There are some things you can do now to prepare, such as:

  • review the STP Phase 2 employer reporting guidelines.
  • consider how some of the information you already report through STP is changing.
  • find out what new information you’ll need to report and consider where you capture and store some of this information now, if it’s not in your payroll system.
  • review your business and payroll processes, and plan for how and when you’ll need to do this.