Authors

Rick Kimberley
Rick Kimberley
Partner

In the 2019–20 Federal Budget, the government announced that Single Touch Payroll (“STP”) reporting would be expanded to include additional information.

The expansion of STP, also known as STP Phase 2, requires employers to disclose additional payroll information to the Australian Taxation Office (“ATO”).

The purpose is to ensure that employees are being paid correctly, increase transparency in disclosures of income, and improve data matching on reported earnings. The introduction of STP Phase 2 also reduces the administrative burden on employers to report payroll information to multiple government agencies.

STP Phase 1 currently requires employers to report the following information to the ATO:

  • Gross (income)The expansion of STP, also known as STP Phase 2, requires employers to disclose additional payroll information to the Australian Taxation Office (“ATO”).
  • Allowances
  • Termination payments including unused leave on termination and lump sum payments
  • PAYG Withheld
  • Reportable employer superannuation contributions including salary sacrifice super
  • Superannuation guarantee contribution
  • Reportable fringe benefit amounts
  • Lump sum E
  • Foreign employment income

STP Phase 2 will require employers to report the following information to the ATO:

  • Gross (income)
  • Allowances
  • Termination payments including unused leave on termination and lump sum A, B and D (ADJUSTED)
  • PAYG Withholding
  • Reportable employer superannuation contribution including salary sacrifice super
  • Superannuation guarantee contribution
  • Reportable fringe benefit amounts
  • Lump sum E
  • Overtime (NEW)
  • Bonuses and commissions (NEW)
  • Paid leave (NEW)
  • Directors’ fees (NEW)
  • Salary Sacrifice (NEW)
  • Deductions for union and professional association fees and workplace giving (NEW)
  • Child support  (NEW)

What isn't changing?

Before we go into the detail of the additional information that will need to be reported through Phase 2, let's clarify what isn't changing:STP Phase 2 requirements can be broken down into 3 separate activities

  • the way you lodge events, regardless of whether you are lodging as an employer, intermediary, or a registered tax agent;
  • the due date for lodging events;
  • the types of payments that are needed;
  • tax and super obligations;
  • end-of-year finalisation requirements.

Key dates and payroll software automatic update deadlines

STP Phase 2 initiative was introduced on 1 January 2022 and most of the major payroll providers have an extended deadline for implementation and reporting in place to 31 December 2022.

Action & Next Steps

STP Phase 2 reporting has been enabled by your Digital Service Provider (DSP), that is, your compliant payroll software provider, however review of current and future state pay components will require review and mapping accordingly to ensure pay components are reported correctly.

STP Phase 2 requirements can be broken down into 3 separate activities:

  • Review pay category payment classification mappings
  • Review leave category payment setup
  • Assign new classifications to salary sacrifice deduction categories

Further information can be obtained from the ATO. 

Our recommendations

We strongly recommend that you undertake a review of your payroll categories to ensure they are aligned with Single Touch Payroll Phase 2 (STP2) requirements.

From our discussions with the ATO, we understand they will be utilising STP 2 data to assess compliance with not just STP reporting obligations, but broader obligations including Superannuation Guarantee (SG). Given the potential impact of non-compliance for obligations such as SG (where the cost of rectifying an underpayment can be as much as 5-7 times the initial shortfall and Directors can be held personally liable) ensuring compliance with these obligations should be a priority.  

For further information

Please feel free to reach out to your local RSM office should you have any questions on the above.

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