STP PHASE 2 – 31 March 2023
If you haven’t already, this is your reminder that it’s time to transition to STP Phase 2. Mandatory Phase 2 reporting is set to commence on 31 March 2023.
Single Touch Payroll (STP) is a government initiative that requires employers to report their employees’ tax and superannuation information to the Australian Taxation Office each time they run their payroll.
Instead of reporting this information at the end of the financial year, employers now need to submit this information to the ATO after each pay run using compliant software. STP streamlines the process of reporting payroll information, reduces errors, and ensures that employees are paid accurately and on time.
STP Phase 2 requires extra information to be reported with each STP pay event. Additionally, Phase 2 submits the pay run information to multiple government agencies by using standardised categorisation of income and payroll components.
Below is an overview of the necessary procedures for implementing STP Phase 2. To access detailed guidelines for XERO, MYOB and Quickbooks software, simply click on the links provided at the bottom of this email.
1. Update Employee Records: The first step enables the transition of existing payroll employee records to STP Phase 2 compliance. Each employee record requires
- Employment type – whether the individual is an employee or contractor;
- Income type – how the individual is paid, such as salary and wages or closely held payee;
- Employment basis – whether the individual is full-time, part-time, or casual;
- Tax scale – the PAYG tax scale category that determines how much tax should be withheld for an employee.
2. Replace earnings pay items
For step two, assign ATO reporting categories to your existing earnings pay items from the Payroll settings or access the pay item transition tool from the STP Phase 2 portal. Note, Pay items that already have the correct earnings category assigned in Payroll settings do not need to be replaced. For example, if Ordinary hours has a category of Ordinary Time Earnings, this will not need to be updated.
3. Update leave pay items
You will need to assign a leave category to each of your active leave pay items in your organisation. The category determines how the payment is reported to the ATO through STP Phase 2. In the Payroll settings, review all leave categories and identify which paid leave pay items are missing a category.
4. Switch to Phase 2 Reporting
Once the three previous steps have been completed and the payroll data is updated, you will be able to opt-in to Phase 2 reporting.