Show download pdf controls
  • Expanding Single Touch Payroll (Phase 2)

    What Single Touch Payroll Phase 2 is

    In the 2019–20 Budget, the Government announced that Single Touch Payroll (STP) would be expanded to include additional information.

    This expansion of STP (also known as STP Phase 2) will reduce the reporting burden for employers who need to report information about their employees to multiple government agencies. It also supports the administration of the social security system.

    The mandatory start date for STP Phase 2 reporting will be 1 January 2022.

    See also:

    What’s next

    There is nothing you need to do right now. We are working closely with digital service providers who will update their STP-enabled software.

    We have published a factsheet which covers the key changes and more detailed information will be available soon.

    It’s important to remember that all STP-enabled solutions have different functions and updates for the expansion will be offered in different ways. What you need to do to set up will depend on what product you use and how you manage your payroll.

    More information about applying for additional time, if required, to transition to STP Phase 2 will be provided soon.

    What isn’t changing

    While you will need to report additional information in your STP report, there are many things which aren’t changing, such as:

    • the way you submit your STP report
    • STP reports are still due on or before pay day unless you are eligible for a reporting concession
    • the types of payments that are in-scope for STP reporting
    • taxation and superannuation obligations
    • end of year finalisation requirements.

    Key changes

    The additional information you need to report should already be captured in your current payroll software.

    The key changes to the STP report include:

    Employment conditions

    You already provide some employment condition information through your STP report such as your employee’s commencement and cessation date and other information through the employees TFN declaration.

    The extra information you will include in your STP report will mean that you will no longer need to send Tax File Number (TFN) Declarations to us – you will only need to keep them with your employee records.

    This information includes both the following.

    Employment Basis – the work pattern or engagement relationship. For example, whether your employee is full-time, part-time or casual.

    Tax Treatment – there are many factors that help you work out the correct amount to withhold for your employees based on the information your employee provides in their TFN declaration and information you know about the employee. By reporting some extra information each payday, you will help us identify the factors that influenced how you calculated the pay as you go withholding. For example, where your employee has notified you that they have a Study Training Support Loan.

    Reporting this information will allow us to notify your employee if they have provided you with incorrect information which may lead to them getting a tax bill at the end of the year.

    You will also need to provide information if your employees leave that will reduce the need for you to provide them with separation certificates. This information will include a Cessation type – when your employee ceases employment, you will need to provide a reason for the separation in your STP report. There are many reasons why employees leave, for example you will tell us whether it was voluntary, a redundancy or due to illness.

    Income type and Country code

    The reporting of income types and country codes is being introduced to identify payments you make to your employees with specific tax consequences and to make it easier for them to complete their individual income tax return.

    It will also help us identify where you are using a concessional reporting arrangement, such as for Closely Held payees.

    Country codes will need to be reported about the home country of your employee who is either an inbound assignee or working holiday maker, or the host country of the employee who is an Australian resident working overseas.

    Disaggregation of gross

    Currently your STP report includes gross, which is the total of many different components and payment types. Because some of these are treated differently for Social Security purposes, you will now need to report more detail.

    Your STP report will separately itemise the components which make up the gross amount by the following payment types:

    • bonuses and commissions
    • directors fees
    • paid leave
    • salary sacrifice
    • overtime
    • allowances
    • gross (other).

    Currently some allowances are reported separately, and some are reported as part of gross.

    You will need to report all allowances separately, not just expense allowances that may have been deductible on your employee’s individual income tax return. This means that allowances previously reported as gross must now be separately itemised and reported.

    Salary sacrifice

    Changes to superannuation guarantee law that apply from 1 January 2020 mean that salary sacrifice contributions can no longer be used to reduce ordinary time earnings or count towards your minimum superannuation guarantee obligations.

    You will need to report salary sacrificed amounts in your STP report, which will make it easier for your employees to understand their superannuation entitlements when looking at their income statement.

    Lump sums

    There are changes on how lump sum payments will be categorised. These changes include both the following.

    A financial year indicator has been added to lump sum E. If you make a lump sum E payment, each financial year relevant to the lump sum E amount paid must now be included in your STP report prior to finalisation of your employee’s records. This will eliminate the need for you to provide lump sum E letters in most cases.

    New lump sum W – the return to work payment that occurs in extremely limited circumstances and taxed concessionally was formerly reported in STP under Payee gross. It now joins the lump sum payment types in separately itemised reporting.

    Reporting previous Business Management Software IDs and Payroll IDs

    You may have the option to provide us with previous Business Management Software IDs and Payroll IDs in your STP report where there has been a change to one of these. This might occur when you have had a change of business structure or where you have changed software and do not have the ability to zero out or finalise the previous records.

    This will help us reduce and fix issues with duplicate income statements for employees in ATO online.

    This is optional and not all STP-enabled solutions will offer this functionality.

    Child support garnishees and Child support deductions

    You will have the option to include Child support garnishees and Child support deductions in your STP report which will reduce the need for separate remittance advice reporting to the Child support registrar.

    Last modified: 19 Apr 2021QC 65099