What is Single Touch Payroll Phase 2?
STP Phase 2 aims to streamline the reporting obligations for reporting via STP by removing the need for manual reporting to other government agencies.
The ATO is also changing reporting requirements so that they can better assist your employees when completing their Individual Income Tax Return (IITR) and income tested payments are correctly calculated when taking into consideration employee earnings for the financial year.
For more information about STP Phase 2, refer to the ATO website.
When are the STP Phase 2 changes being made?
The ATO is introducing phase 2 of STP reporting in early 2022. Mandatory reporting will begin from 1 January 2022.
What changes will be made for STP phase 2?
Here's a summary of the changes you should expect with STP phase 2:
- Termination Reason - A reason for terminating an employee is going to be mandatory to report to the ATO via STP. This will take away the need for an employment separation certificate to be issued to the employee altogether.
- Child support garnishee/deduction amount - Employers will be able to report child support deductions/garnishees via pay events, which will remove the need to report separately on a monthly basis. This will initially be voluntary reporting and if they choose not to report via STP, they will need to continue reporting monthly as per existing processes.
- Income stream collection - Employers will need to classify the payments made to an employee following an ATO term called Income stream collection when they submit their STP report to the ATO. This includes income type, payment type and may also include a country code (for specific income types).
- Tax file number declaration - Employee tax information will be incorporated via STP reporting, eliminating the need to submit tax file declarations to the ATO as a separate process. This means that for Phase 2, the existing functionality of tax file declaration reporting in QuickBooks Payroll will become redundant as it will be done via STP reporting instead.
- Lump sum E letters - This information will be included in the pay event prior to finalisation of the employee's Income Statement and so employers will not need to provide the lump sum E letter to employees each financial year.
- Transitioning employees from another payroll system - Businesses transitioning from one payroll system to another will be able to enter the previous BMS ID/payee IDs in the new system and then proceed to use the new system's BMS ID/payee ID. The ATO will link the information so that there is only one income statement reported for each employee. This replaces the need to manually adjust employee YTD earnings after transitioning payroll systems.
- Paid leave - Paid leave will no longer be incorporated as part of gross earnings when reporting earnings via STP. Instead it will be reported using itemised leave type codes.
- Negative Year-to-Date (YTD) reporting - The ATO will allow negative YTD amounts to be submitted via STP.
- Allowance items - Additional allowance type codes will be added to meet the new reporting requirements. This will allow the ATO to assist employees when completing their individual income tax returns.