What is Single Touch Payroll?
Single Touch Payroll or STP was launched in July 2018 by the Australian Government as an initiative to streamline the reporting of tax and superannuation information. Businesses are required to use STP-enabled software to send employee’s salary & wages, PAYG/tax withheld and super information to the Taxation Office each time they are paid.
All employers were required to report payroll information through STP from:
- 1 July 2018 for employers with 20 or more employees.
- 1 July 2019 for employers with 19 or fewer employees.
What Changes Will There Be in Single Touch Payroll Phase 2?
Phase 2 of STP is expected to come into effect at the start of 2022. Phase 2 aims to further streamline reporting obligations by removing the need for manual reporting to other government agencies.
Reporting requirements are also changing to better assist employees in completing their Individual Income Tax Return (IITR). Businesses and vendors need to prepare for the roll-out of phase 2 as reporting will be further complicated. Voluntary reporting began on 1 January 2021, but mandatory reporting will commence from 1 January 2022. To simplify the new updates, we’ve summarised some of the key changes:
Key Changes in Phase 2
Reason for Termination
It will be mandatory to report the reason for an employee’s termination to the Australian Taxation Office (ATO) via STP. Employers will no longer be required to provide an employee with an employment separation certificate as this will now be included in the STP report.
Income Stream Collection
When employers submit their STP report to the ATO they must classify the payments to employees under the ATO term Income Stream Collection, including income type and payment type.
Transitioning Employees to Another Payroll System
Businesses transitioning to a different payroll system will be able to enter the previous BMS ID/payee IDs into the new payroll system and continue using it. As the ATO will link the information, there will only be one income statement reported for each employee, replacing the need to manually adjust employee YTD earnings after transitioning payroll systems.
Tax File Declarations
In Phase 2, employee tax information will be incorporated via STP reporting. This will eliminate the need to submit tax file declarations in a separate process.
Child Support Deduction
Employers will be able to report child support garnishee/deductions via pay events in Phase 2. This removes the need to report it separately every month. As this will be initially voluntary, employers which choose not to report via STP will have to continue reporting monthly through the existing process.
Lump Sum E Letters
Employers will no longer be required to provide lump sum E letters to employees at the end of each financial year. Phase 2 means that this information will be included in the pay event prior to the finalisation of the employee’s income statement.
Paid Leave
Paid leave will be reported using itemised leave type codes and no longer be incorporated as part of gross earnings when reporting earnings via STP.
Allowance Items
For the ATO to assist employees when completing their individual income tax returns, additional allowance type codes will be added to meet reporting needs.
Negative YTD Reporting
Negative YTD amounts are allowed to be submitted via STP.
*This information is intended to be a general guide, for more details on Single Touch Payroll Phase 2 please visit the government website or contact us now!
Keep Up with the Latest Changes in APAC!
The Asia-Pacific region is developing rapidly and labour laws are constantly changing. To make the lives of business leaders in Asia easier, Links provides updates on the latest developments in the region. To learn more about legislation updates across Asia, read our Onboard publication or contact our team of professionals now!
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