Introduction
In 2018, the Australian Government introduced Single Touch Payroll (STP), changing how employers report payroll information. Adhering to payroll rules is crucial for businesses to operate smoothly. Recently, the Australian Taxation Office (ATO) launched Single Touch Payroll (STP) Phase 2, bringing in major changes to employer reporting guidelines. In this detailed explanation, we’ll break down these important updates to help you grasp the key details easily.
What is Single Touch Payroll Phase 2?
STP Phase 2 is a big change in how companies report payroll information. Building on the first STP, this phase brings in subtle improvements to make reporting easier for employers. Let’s dive deep into this to understand how STP Phase 2 works and what it means for businesses.
Employer Reporting Obligations
In STP Phase 2, there are new rules to follow when reporting, aiming to improve compliance. This part will carefully break down these rules, giving a detailed look at the actions employers must take to meet regulatory standards. Understanding these rules well is crucial to avoiding fines and making sure the payroll process runs smoothly.
Understanding STP Phase 2
What’s New?
The expansion of STP comes with a set of pivotal changes:
1. TFN Declarations Through STP
Traditionally handled separately, Tax File Number (TFN) declarations are now seamlessly integrated into the STP reporting process.
2. Enhanced Reporting of Income Types
STP Phase 2 requires detailed reporting of income types, covering salary and wages, closely held payees, and labour hire, among others.
3. Termination Reasons Reporting
When an employee concludes their tenure, employers must now report termination reasons through STP, streamlining the end-of-employment process.
4. Detailed Reporting of Various Payments
Separate reporting is mandated for paid leave, allowance types, directors’ fees, lump sum W (return to work), bonuses, commissions, and lump sum E (back pay for prior income years).
5. Introduction of Tax Treatment Codes
A new addition involves tax treatment codes for each employee, providing an abbreviated way to inform the ATO about factors influencing tax withholding from employee payments.
Compliance Details
Who is Affected?
All Australian businesses with employees on their payroll will feel the impact of these changes. The Australian Government now demands additional information, such as income or payment type and reasons for employment cessation, through STP.
STP Phase 2 Commencement
The official ATO start date for STP Phase 2 was January 1, 2022. However, digital service providers like Xero and MYOB have secured extensions for a flexible transition.
Xero Deadline:
Employers using Xero had until March 31, 2023, to transition to STP Phase 2.
MYOB Deadline:
MYOB users had to complete the transition by January 1, 2023.
Note for MYOB users:
If you face challenges in making the move, our office is here to assist you. Feel free to get in touch for more information.
Action Steps
Software Updates
Digital service providers, including Xero and MYOB, are diligently updating their software to facilitate Phase 2 reporting. To ensure compliance, follow the instructions within your software to update details before the looming deadlines. Failure to comply may result in penalties.
Conclusion
Embracing STP Phase 2 isn’t just about following the rules; it’s a chance to make payroll smoother and reports more accurate. Stay ahead by learning about these changes and updating your software on time.
FAQs
1. What is STP Phase 2?
STP Phase 2 is an expansion of the Single Touch Payroll system, bringing in new rules for reporting that Australian businesses must follow.
2. When does STP Phase 2 officially start?
STP Phase 2 began on January 1, 2022, but there are extended deadlines for digital service providers.
3. What information needs to be reported under STP Phase 2?
Employers have to report things like TFN declarations, detailed income types, reasons for terminations, and various payment details.
4. Why is MYOB offering extensions for STP Phase 2?
MYOB users facing difficulties in transitioning to STP Phase 2 had until January 1, 2023, to make the necessary changes.
5. How can I avoid penalties for non-compliance with STP Phase 2?
To steer clear of penalties, make sure to keep your software up to date through your digital service provider to meet the requirements of STP Phase 2.
