Single Touch Payroll (STP) is the government initiative requiring businesses to digitally report pay details to the ATO.
In the 2019–20 Budget, the Government announced that STP would be expanded to include additional information. Single Touch Payroll Phase 2 (STP Phase 2) will require employers to report additional information through STP on or before each payday. This information will include details such as income or payment type and the reason for any cessation of employment.
The program’s expansion – Single Touch Payroll Phase 2 (STP Phase 2), initially planned for 1 July 2021, has been postponed to 1 January 2022. The ATO will allow employers until 31 March 2022 to start reporting if they don’t have an STP reporting solution in place. Some payroll software providers already have deferrals in place to allow a longer time for the transition to Phase 2 reporting.
Your software provider will advise you when the additional reporting has been built into your payroll software and if you are required to make any changes. Below is a summary of the current status for Xero, MYOB and Intuit QuickBooks:
- Xero has secured a 12-month deferral for all partners and customers until 31 December 2022 and is working closely with the ATO to roll out the Phase 2 changes in Xero Payroll.
- MYOB is ready to go. In the latest releases, they have added some new features that will need to be manually updated – please see the article below: https://help.myob.com/wiki/display/ar/Getting+ready+for+STP+Phase+2#expand-UpdatedATOreportingcategories
- If you are already a QuickBooks user, the payroll plans are already 100% ATO compliant and Single Touch Payroll Phase 2 enabled. There should be no additional or manual features that clients need to install. Although, all clients should ensure that the employee files are filled out with the necessary information that will be lodged. For further information on QuickBooks Single Touch Payroll https://quickbooks.intuit.com/au/payroll/single-touch-payroll/
How is Phase 2 different from Phase 1
STP Phase 2 is an expansion of the program to capture more information. It will reduce the reporting burden for employers who need to report information about their employees to multiple government agencies. Changes will include more payroll detail and make it easier for employees to interact with Services Australia.
STP Phase 2 doesn’t change the payments you need to report through STP, but it does change how those amounts need to be reported. The changes include detailed income types, lump-sum payments, itemised allowances, child support and the ability to lodge tax file number declarations from within STP reporting.
Employment separation certificates upon the termination of employment may no longer be needed, as Phase 2 reporting will include the reason an employee ceased employment.
What isn’t changing
While you’ll need to report additional information in your STP report, many things 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.
If you need more time
- You can apply for more time past your software providers deferral if you need more time to transition.
- You’ll be able to apply for a delayed transition from December 2021.
- There won’t be penalties for genuine mistakes for the first year of Phase 2 reporting until 31 December 2022. This includes employers who have already started Phase 2 reporting.
For more information on the STP Phase 2 Changes ATO Website
If you have questions regarding STP Phase 2, please contact the team at Kennedy Cross.