Single Touch Payroll Phase Two

Single Touch Payroll Phase Two

Colleen Stromei, LVML CFO, Addflow Director

Single Touch Payroll Phase Two (STP II) is an expansion of the ATO's payroll reporting system, which commenced on 1 January 2022. Employers can apply to the ATO for more time to transition to STP II; however, many Digital Service Providers (DSPs) have applied for this deferral on behalf of all their payroll users.

For example Xero and MYOB have a deferral until 31 December 2022. Please refer to your DSP for information on their deferment date.

How STP II will work

Phase one of STP required employers to send pay, tax and super details from their accounting software to the ATO each time a pay run is processed.

Under the expanded STP II provisions, employers are required to report additional information which, according to the ATO, 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.

What new information will be reported?

The way STP reports are submitted will not change however they will now include

Tax File Number Declaration (TFND) details, replacing the need to file TFNDs with the ATO

termination reason, replacing the need for employee separation certificates

employment basis, such as full time, part-time, casual or labour-hire

income types, such as wages, closely-held payees (e.g. family members), working holidaymakers and labour-hire

country code for employees who report to tax jurisdictions outside of Australia

disaggregation of gross wages into more detail, including allowances, bonuses, commissions, director's fees, overtime, paid leave and type of leave and salary sacrifice

lump sum E payments, or back pay from previous income years, replacing the need for Lump Sum E letters

an option to include child support garnishees and deductions, replacing the need for separate advice to the Child Support Registrar

How to get ready for these changes

A good understanding of the new reporting fields and how to set them up correctly in the payroll system will ensure that your employees' details are reported accurately to their accountant, the ATO, and other government agencies.

Employers can refer to the ATO website to familiarise themselves with the STP II requirements. In addition, most DSPs, such as Xero, Intuit and MYOB, have created support materials, including webinars on how to set up their payroll systems for STP II.

If members need additional support, LVML recommends they contact their BAS or Tax Agent for advice on making the necessary changes to their payroll systems. Please note that an advisor must be registered with the Tax Practitioners Board to provide this service. You can ask your advisor for their registration details or search the register at www.tpb.gov.au.