Single Touch Payroll 2 (STP2) - what is it and what to do now ?

What is Single Touch Payroll Phase 2?

The expansion of STP, also known as STP Phase 2, reduces the reporting burden for employers who need to report information about their employees to multiple government agencies.

It helps Services Australia’s customers, who may be your employees, get the right payment at the right time.

Benefits of STP Phase 2

Benefits for employers

The ATO will use the STP Phase 2 information to streamline employer interactions. For example:

•  You'll no longer have to send the ATO your employees' tax file number (TFN) declarations. Your employees will provide it to you, and you'll need to keep it with your employee records.

The ATO will also share payroll information you report to us in near real-time with Services Australia. They'll 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 help the ATO  streamline interactions for employees, such as:

Making it easier for employees at tax time now the ATO have better visibility of the types of income received and where it should be pre-filled on their individual income tax return.

Over time, the new information reported will allow the ATO to tell employees if they've provided you 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

1. •  streamlining claims – their customers won’t need to supply as many documents
2. •  enhancing Family Tax Benefit processes – by sending SMS and email messages to their customers when   
3. •   STP data shows their family income estimate may be too low
4. •   they have a new job
5. •   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.

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

•      Employment and taxation conditions

•      Income types

•      Country codes

•      Child support

•      Business Management Software IDs and Payroll IDs

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.

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.

Income types

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

The reporting of income types introduced in Phase 2:

•  identifies payments you make to your employees with specific tax consequences

•  makes it easier for them to complete their individual income tax return

•  helps 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

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.

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 to do now ?

The Software (Xero) needs to be comprehensively reviewed in Payroll set up and configured (mapped) to allow you to be compliant under STP 2 rules - KRS will be providing this service to our clients to assist them in the transition.

         Watch this space for more information !