What is it? Do I need to Worry? When is it happening?

Just when you thought, hey I have STP done pat in my software and everything is travelling AOK, the ATO have announced the rollout of STP Phase 2.

STP Phase 2 expands the level of detail coming out of business payrolls and is largely aimed at exchange of information with Services Australia and other Government Entities.

At the moment STP transfers to the ATO information about gross income, tax and superannuation. STP Phase 2 needs to have payroll broken down into more detail.

The Tax Office has now released a fact sheet for employers, noting that STP reports will soon need to separately itemise the components which make up the gross amount, including bonuses and commissions, directors fees, paid leave, salary sacrifice, overtime, allowances and gross (other).

Employers will also need to report whether an employee is on a full-time, part-time or casual employment basis, the tax treatment for PAYG purposes, and the reason for separation when employees leave.

Salary-sacrificed amounts will also need to be included in an STP report, while lump-sum payments will be broken down into two different categories.

The reason for all this detail is so that Services Australia can determine immediately what welfare benefits may need to be paid when an employee resigns or is terminated and turns to social welfare for support.

The upside of all this detail for employers is that TFN declarations will all occur via STP, separation certificates will no longer be required and child support payments will be all be captured with payroll.

As a business owner, you don’t need to do anything just yet. As all of this is managed via cloud payroll systems, it’s up to the software developers to update their software to allow for this increased reporting of payroll data. We can assume that your payroll will need to be more detailed than in the past and that your payroll categories will need to be somehow mapped to the STP reporting categories in the same way these needed to be matched way back in 2018. But don’t stress that is what we are here for!

Now, when is this scheduled for? Wait for it. 1 January 2022. Great launch date, right in the middle of holidays. I imagine that this is a soft date and that most employers will not be ready to get this happening until late January to early February when they return from the Christmas break.

However a more pressing date is 1 July 2021 for small employers with closely held payees (think family businesses) which up until this date were allowed to report quarterly with their BAS through their agents.

So, if you fall into this category you will need to have STP enabled payroll software

The ATO has confirmed that small employers can report payments to closely held payees through STP in three ways:

  • Reporting actual payments in real time.

  • Reporting actual payments quarterly.

  • Reporting a reasonable estimate quarterly.

We strongly suggest you discuss with your Advisor how you should report if you are making payments to closely held payees as you need to consider which of these 3 options is best for you.

Click here to download ATO’s factsheet.