1. Single Touch Payroll (STP) in Australia
Single Touch Payroll (STP) is part of the Australian government’s commitment to streamlining employer reporting obligations. Most employers are now reporting through STP. If you’re not yet doing any STP reporting, you’ll need to start reporting unless you have an exemption or a deferral.
Single Touch Payroll (STP) Phase 2 is the next level of mandatory reporting that will see Australian businesses build on their existing STP reporting to share even more information with the ATO and other government agencies each time a pay run is processed.
2. STP Phase 2
In the 2019–20 Budget, the government announced that STP would be expanded to include additional information. This is called STP Phase 2 and introduces a set of new ATO earnings categories for use in your pay items. This is because gross amounts for each income type will now need to be reported as a separate, itemised amount on the following individual income components:
- Gross payments (Ordinary time earnings)
- Overtime
- Directors fees
- Allowances
- Paid Parental Leave
- Bonuses and Commissions
- Lump Sum Payments
- Workers Compensation
When these types of payments are correctly itemised in your STP filing, the data can be shared across government departments (e.g. Centrelink, Child Support Agency plus others).
Including this additional information will:
- Reduce the reporting burden for employers who need to report information about their employees to more than one government agency
- Support the administration of Australia’s social security system
3. Overview of STP Phase 2 Rollout
STP Phase 2 is being rolled out across three stages within Xero. This means that every employer reporting through STP in Xero will need to proceed through the three stage transition process to ensure your payroll data meets STP Phase 2 compliance.
➡️ STAGE 1: Update employee records to meet the new STP Phase 2 filing requirements. This means providing new details on existing staff, like whether they’re an employee or contractor.
➡️ STAGE 2: Identify and update pay items with the new earnings categories as defined by STP Phase 2, e.g. Directors’ fees, Bonuses and Commissions
➡️ STAGE 3: This is the final step in the STP Phase 2 transition which will categorise and break down paid leave into additional subcategories.
It’s important to mark each stage as complete in the STP 2 Portal before moving forward. This ensures your payroll data is accurate and could help reduce filing errors later in the financial year.
If you require information about the allowances that may be applicable for your employees under a particular modern award, visit the Fair Work Ombudsman’s website or seek independent legal advice.
4. STP Phase 2 Deadline Extended
Generally, all employees aged 18 years or older are eligible for super guarantee regardless of how many hours they work. If they are under 18 years old, you need to pay superannuation if they work more than 30 hours in a week.
It doesn’t matter if the employee is:
- Full time, part time or casual
- Receiving a super pension or annuity while working (this includes employees on transition to retirement)
- A temporary resident, such as a backpacker
- A company director
- A family member working in your business.
5. When Your STP Report Is Due
Your STP report is due on or before each payday, which is either:
(1) The payment date stipulated in the electronic transaction to your financial institution or,
(2) If you did not specify a date for payment, the date you intend to make the payment into your employee’s bank account.
You may lodge multiple STP reports on the same day. Your system will generate a timestamp to identify the latest record for each financial year and ensure the employee’s myGov display recognises the latest record.
There are concessional reporting arrangements which provide a later due date in some circumstances.
6. The Impact Of Not Having STP Set Up For Your Business
There are many possible negative consequences if your business isn’t STP compliant including not reporting (or reporting on time).
Some of these may include:
- A Failure to Lodge penalty being applied AND continue to be applied every 28 days until the date of lodgment (up to a max. of 5 penalty units)
- Your employees will not see the correct year-to-date amounts in ATO online services
- You may be subject to an audit or review
STP implementation and ongoing reporting is complex and requires specialist payroll and bookkeeping knowledge for this reason, is to outsource to a tax professional such as a Registered BAS Agent to make sure it’s set up and reported correctly.
7. More Information
For more information about STP and STP Phase 2, refer to the Tax Office:
https://www.ato.gov.au/Business/Single-Touch-Payroll/Expanding-Single-Touch-Payroll-(Phase-2)/
For Xero users, more information is available on the Xero website:
https://www.xero.com/blog/2022/08/stp-phase-2-stage-one-roll-out/
For MYOB users, more information is available on the MYOB website:
Get Professional Help
If you’re ready to put your bookkeeping in trusted hands, finding the right-fit bookkeeping services can be a game changer.
Your Trade Bookkeeping provides a complete bookkeeping, BAS lodgement and payroll service for Tradies in Australia.
Owner Deb Stephenson is a Registered BAS Agent and also offered a Tax Returns Service [under the supervision of Ann Gordon, a highly qualified Registered Tax agent and Nominee for Abfabs Pty Ltd t/as Easy Tax Solutions, Tax Agent Number 70473005].
We work virtually, to provide professional bookkeeping and BAS services to business owners across Australia. We’re here to give you rock-solid peace of mind about where your business is at financially, so you can focus on doing what you love and leave the financial side of things in experienced hands.
To find out more about how professional bookkeeping services can save you time and money, phone Deb today on 0428 954 577, or book a Free Strategy Call here.
