Just when you thought you had all your systems bedded down for Single Touch Payroll (STP), the government is expanding the information on employee payments you need to provide.
So, what will the changes mean for your small business?
STP reporting to expand
Under the current STP rules, employers are required to report payroll information to the ATO each time they pay an employee salary or wages, pay-as-you-go (PAYG) withholding or superannuation.
In the 2019-20 Federal Budget, the government announced an expansion of the data it collected through the STP system starting from 1 January 2022.
The change is called STP Phase 2 and under the new rules, employers will be required to report additional information on or before each pay day.
According to the government, the aim of STP Phase 2 is to “reduce the reporting burden for employers who need to report information about their employees to multiple government agencies”.
The additional data collected from 1 January 2022 will also be used in the administration of the social security system.
New STP Phase 2 requirements
The key changes in your reporting include providing extra information on the employment basis for each of your employees (full-time, part-time or casual).
You will also need to provide information on the tax treatment of their salary. This is to help the ATO identify the factors influencing how you calculated your employee’s PAYG withholding. For instance, where your employee has notified you that they have a Study Training Support Loan.
When an employee ceases employment, you will now need to provide information on the reason, for example, voluntary separation, redundancy or due to illness. This will remove the need for you to provide former employees with separation certificates.
Phase 2 also gives you the option to include child support garnishees and child support deductions in your STP report, reducing the requirement to provide a separate remittance advice report to the Child Support Registrar.
More detailed information
Reporting of income types and country codes is also being introduced with STP Phase 2 to help the ATO identify employee payments with specific tax consequences. The government believes this will allow your employees to complete their personal tax returns more easily.
A significant change with Phase 2 will be the new requirement to separately itemise the components of any gross payment amounts such as bonuses and commissions, directors’ fees, paid leave, salary sacrifice, overtime and allowances.
Allowances will need to be reported separately, not just expense allowances that may be deductible for your employees. Any lump sum payments you make to employees need to be reported under new labels.
Although you need to provide additional information in your STP reports, the way you submit the report, due dates and types of payments covered in your reports will stay the same. Your tax and super obligations and the requirements for end of year finalisation will also stay the same.
Benefits from the STP expansion
The government claims employers will receive a number of benefits from the introduction of STP Phase 2.
A key one is a reduction in the duplicate information you are required to provide to different government agencies, reducing unnecessary interactions with these departments.
You will also no longer be required to send tax file number (TFN) and withholding declaration information to the ATO, as this will be captured in the employment conditions section of your STP report.
By more clearly defining the components making up an employee’s gross income, the government says it will be easier for employers to understand their various obligations.
Assistance with new reporting requirements
The government is working closely with digital service providers to ensure they update their software, so it is ready to commence collecting the additional information from 1 January 2022.
The specific information your business needs to provide for STP Phase 2 depends on the particular software product you use, and how you manage your payroll.
Contact us on 03 5120 1400 if you would like more information or help transitioning your business to the new STP requirements.
Material contained in this publication is a summary only and is based on information believed to be reliable and received from sources within the market. It is not the intention of RGM Financial Planners Pty Ltd ABN 36 419 582 Australian Financial Services Licence Number 229471, RGM Accountants & Advisors Pty Ltd ABN 69 528 723 510 that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. No representation is given, warranty made or responsibility taken as to the accuracy, timeliness or completeness of any information or recommendation contained in this publication and RGM and its related bodies corporate will not be liable to the reader in contract or tort (including for negligence) or otherwise for any loss or damage arising as a result of the reader relying on any such information or recommendation (except in so far as any statutory liability cannot be excluded).
Liability limited by a scheme approved under Professional Standards Legislation.