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  • Reporting the amounts you have paid

    STP Phase 2 doesn't change the payments you need to report through STP, but it does change how those amounts need to be reported.

    These changes will make it easier to identify amounts that have specific tax, super or social security treatments. It will also help us with pre-fill, which will make it easier for your employees when they lodge their individual tax return.

    Income types

    Each amount you pay to an employee will now be assigned to an income type, and you can report amounts assigned to multiple income types throughout the year.

    The reporting of income types helps us identify when:

    • the employee’s income may be taxed differently (such as for working holiday makers)
    • you are using a concessional reporting arrangement (such as for closely held payees)
    • there may be other factors influencing the amounts you are reporting (such as foreign tax obligations and applicable tax treaties).

    Income types that you can assign payments to are:

    • SAW (salary and wages) – this is the most common income type and was formerly known as individual non-business (INB).
    • CHP (closely held payees) – applies when the payee is directly related to the employer, such as family members. If you are using the concessions available to closely held payees, you must report these payments under this income type. This type of income was formerly included in SAW.
    • WHM (working holiday makers) – applies to temporary visitors to Australia who hold a Working holiday visa (subclass 417) or Work and holiday visa (subclass 462).
    • FEI (foreign employment income) – applies to assessable income paid to payees (who are Australian tax residents) that is subject to tax in another country for work performed in that country, if the qualification period is met. There are rules for reporting foreign employment income.
    • IAA (inbound assignees to Australia) – some multinational payers exchange, or transfer, payees between affiliated entities in different tax jurisdictions. If you are using the concessions available to inbound assignees to Australia, you must report these payments under this income type. This type of income was formerly included in SAW.
    • SWP (seasonal worker programs) – applies to regional programs for government-approved employers.
      • Use this income type to report payments to participants in the Seasonal Worker Program and participants in the Pacific Australia Labour Mobility (PALM) scheme who have told you on a TFN declaration that they are a non-resident
      • Do not use this income type to report payments to participants in the Pacific Labour Scheme and participants in the PALM scheme who have told you on a TFN declaration that they are a resident. Use the SAW income type instead.
       
    • JPD (joint petroleum development area) – before 1 July 2020 only.
    • VOL (voluntary agreement) – applies to contractors paid under a voluntary agreement.
    • LAB (labour hire) – applies to payments by a business that arranges for persons to perform work or services, or performances, directly for clients of the entity. Income for contractors only – does not include employees. Employees of labour hire firms should be reported as the relevant income type, such as SAW.
    • OSP (other specified payments) – this is a limited income type that only applies to specified payments by regulation 27 of the Taxation Administration Regulations 2017.

    Different payroll solutions will handle changes to income types differently. If you need to change an income type during the year, you should follow your DSP’s instructions.

    Example: income type reporting

    Backpacker Farms Pty Ltd employs Jane, who is from Europe and has come to Australia on a working holiday maker visa. They include the amounts they pay to Jane in their STP reporting under the income type of WHM (working holiday maker).

    Jane’s working holiday maker visa is about to expire, and she applies for a different type of visa that will allow her to remain in Australia. She is granted a new visa which comes into effect on 1 February.

    The payroll solution used by Backpacker Farms Pty Ltd enables the same Payroll ID to have multiple income types. When they pay Jane after 1 February, they include:

    • a YTD amount against the WHM income type that is the amount they paid Jane before 1 February, and
    • another YTD amount against the SAW income type that is the amount they paid her after 1 February.

    At the end of the financial year, Jane logs in to ATO online services to complete her tax return. She is able to easily identify the amount she needs to report as working holiday maker income, which is taxed differently. This is because her income statement shows the amount she earned as a working holiday maker before 1 February and also the amount she earned as regular salary and wages after 1 February.

    Note: if your payroll solution requires you to use separate Payroll IDs for different income types then your employee will see separate income statements in ATO online services.

    End of example

    Country code

    You must report a country code when you make payments to employees with the following income types:

    • foreign employment income (FEI)
    • inbound assignees to Australia (IAA)
    • working holiday maker (WHM).

    If you make a payment to an Australian resident working overseas, you must provide information about the host country.

    If you make a payment to a working holiday maker or inbound assignee, you must provide information about their home country.

    Disaggregation of gross

    In STP Phase 1, the gross amount you reported contained different types of amounts depending on the particular income type. This approach has changed in STP Phase 2 and all payment types are now reported consistently for each income type.

    Instead of reporting a single gross amount, you will now separately report:

    There are rules about which separately reported amounts can be included against each income type.

    If your employee has an effective salary sacrifice arrangement, you previously would have reported post-sacrifice amounts to us. This changes as part of STP Phase 2. You now need to report pre-sacrifice amounts, as well as reporting salary sacrifice separately.

    Your DSP will advise you on how to implement this change in your solution.

    Gross

    All remuneration you pay to employees that is reportable through STP, and is not separately itemised, should be reported as gross.

    Only pre-sacrifice amounts that are classified as ordinary time earnings (OTE) should be included as gross.

    If you are making a back payment or arrears payment, it may be included as gross.

    The following table outlines examples of what should and shouldn't be included in Gross.

    Gross reporting examples

    Include as gross

    Don't include as gross

    • ordinary hours worked
    • casual loading
    • shift penalties (including public holiday penalties)
    • payments to employees on Workers’ compensation who are at work performing duties
    • piece rates for work done during ordinary hours
    • daily rates for employees compensated using a flat daily rate
    • flexi time        
      • all ordinary hours paid to employees under a flexi time arrangement are part of gross
      • flexi time arrangements are considered different to Rostered days off (RDOs) and Time off in lieu (TOIL)
       
    • breach of rest break payments. When an employee does not get an appropriate rest break between shifts, some awards require employees to be paid at overtime rates until the employee is released from duty – even though the employee is being paid at overtime rates, they are working ordinary hours and payment is reported as gross
    • time for travel or training paid within the span of ordinary hours
    • charge rates for work performed, outcomes achieved, or targets met by contractors 

     

     

    Paid leave

    You will now need to separately report the following leave payments made to your employees in your STP Phase 2 report:

    You don't need to report unpaid leave through STP as there is no payment to report.

    Other paid leave (paid leave type O)

    All forms of paid absences should be reported as Other paid leave (paid leave type O) unless they are required to be itemised using another leave type.

    Only pre-sacrifice amounts that are classified as OTE should be included as other paid leave.

    If you are making a back payment or arrears payment, it may be included in other paid leave.

    The following table outlines examples of what should and shouldn't be included in Other paid leave.

    Other paid leave reporting examples

    Include

    Don't include

    • annual leave and leave loading
    • long service leave
    • personal or carer’s leave
    • RDOs (time taken and paid at ordinary rates)
    • TOIL (time taken and paid at ordinary time)
    • compassionate and bereavement leave
    • study leave
    • family and domestic violence leave
    • special paid leave
    • gardening leave 

     

     

    Paid parental leave (paid leave type P)

    All types of paid parental leave must now be reported separately.

    Only pre-sacrifice amounts that are not classified as OTE according to the Superannuation Guarantee Act 1992 (SGAA) should be included as paid parental leave. Some industrial instruments may require super to be paid on these amounts.

    If you are making a back payment or arrears payment, it may be included as paid parental leave.

    The following table outlines some examples of what should and shouldn't be included in Paid parental leave.

    Paid parental leave reporting examples

    Include

    Don't include

    • government paid parental leave (GPPL)
    • employer paid parental leave 

     

     
    Workers’ compensation (paid leave type W)

    Some employers pay workers' compensation to their employees, and in other circumstances the insurer makes the payment directly to the employee. Where you have made workers’ compensation payments, these must now be reported separately.

    Only pre-sacrifice amounts that are not classified as OTE according to the SGAA should be included as workers’ compensation. Some industrial instruments may require super to be paid on these amounts.

    If you are making a back payment or arrears payment, it may be included in Workers’ compensation.

    The following table outlines some examples of what should and shouldn't be included in Workers’ compensation.

    Workers' compensation reporting examples

    Include

    Don't include

    • payments for any approved (or anticipated approval of) workers’ compensation absence paid by the employer to the employee
    • top-up payments made by the employer
    • workers’ compensation payments made after termination    
      • workers’ compensation payments may be required to continue to be paid, even after the employee is terminated, in accordance with insurer requirements
      • although no longer technically an employee absence, these payments should be reported as workers’ compensation (paid leave type W
       

     

    • payments to employees on workers’ compensation who are at work performing duties – this payment must be reported as gross

     

    Ancillary and defence leave (paid leave type A)

    There are a range of leave types that are paid while employees participate in volunteer or community activities. If you make ancillary and defence leave payments, they must now be reported separately in your STP Phase 2 report.

    Only pre-sacrifice amounts that are not classified as OTE according to the SGAA should be included as ancillary and defence leave. Some industrial instruments may require super to be paid on these amounts.

    If you are making a back payment or arrears payment, it may be included in Ancillary and defence leave.

    The following table outlines some examples of what should and shouldn't be included in Ancillary and defence leave.

    Ancillary and defence leave reporting examples

    Include

    Don't include

    • community service leave, including voluntary emergency management activities for bodies such as a State Emergency Service, Country Fire Authority and the RSPCA
    • jury duty leave, including attendance for jury selection and jury duty
    • defence reserve leave paid to volunteers of the Australian Defence Forces to undertake defence services
    • all paid absences – including 'make-up pay' for ancillary and defence leave are to be reported as ancillary and defence leave 

     

    • defence leave taken by the employee using annual leave, long service leave (LSL) or rostered days off (RDOs) – this should be reported as other paid leave.

     

    Cash out of leave in service (paid leave type C)

    When you pay out leave entitlements in lieu of your employee taking the absence from work, you must now report this separately.

    The cash out of leave can only occur when it is allowed by Fair Work rules or other legislative sources.

    Only pre-sacrifice amounts that are classified as OTE should be included as cash out of leave in service.

    If you are making a back payment or arrears payment, it may be included as cash out of leave in service.

    The following table outlines some examples of what should and shouldn't be included in Cash out of leave in service.

    Cash out of leave in service reporting examples

    Include

    Don't include

    • cashed out annual leave and leave loading
    • cashed out long service leave
    • cashed out personal leave
    • cashed out rostered days off 

     

    • cash out of TOIL – this is reported as overtime
    • cash out of annual leave loading that is clearly linked to a loss of overtime – this is reported as overtime

     

    Unused leave on termination (paid leave type U)

    If you make payments to your employees for unused leave on termination, you must separately include these payments. For more information, see termination payments.

    Overtime

    You need to report overtime amounts paid to your employees.

    Overtime is when an employee works extra time.

    It can include work done:

    • beyond their ordinary hours of work
    • outside the agreed number of hours
    • outside the spread of ordinary hours (the times of the day ordinary hours can be worked).

    Only pre-sacrifice amounts that are not classified as OTE according to the SGAA should be included as overtime.

    If you are making a back payment or arrears payment, it may be included as overtime.

    The following table outlines some examples of what should and shouldn't be included in Overtime.

    Overtime reporting examples

    Include

    Don't include

    • overtime worked
    • leave loading that is demonstrably referable to a loss of overtime (both taken and cashed out)
    • cash out of accrued TOIL hours. If the absence is not taken, the employee may request that the accrued time be paid out as overtime – the cash out of TOIL in service is reported as overtime
    • on call, stand-by or availability allowances to remain in readiness for a return to work, payable outside the employees normal working hours
    • call back payments. If an employee is called back into work for overtime
    • overtime bonuses that relate entirely to time worked outside of normal hours
    • identifiable overtime component of annualised salary – for those annualised salary or wages amounts that have distinctly identifiable components within the outer limits that are expressly referable to overtime hours
    • excess travelling time for travel to an alternative place of work outside the ordinary span of hours
    • hourly driving rates or rates per km –the excess of the total ordinary hours per period, if no regard to the terms of the award, or the stipulated overtime rate for piece-rate awards that include hourly driving rates and rates per kilometre
    • part-time additional hours – this is payable in accordance with industrial instruments that stipulate those additional hours are paid at a penalty or overtime rate that do not accrue leave entitlements 

     

    • shift penalties – these are reported in gross
    • breach of rest break payments        
      • when an employee does not get an appropriate rest break between shifts, some awards require employees to be paid at overtime rates until the employee is released from duty
      • even though the employee is being paid at overtime rates, they are working ordinary hours and payment is reported as gross
       

     

    Bonuses and commissions

    You may pay some employees bonus and commission payments to reward their performance, service or for meeting a specific goal. These are typically paid as a lump sum.

    Only pre-sacrifice amounts that are classified as OTE should be included as bonuses and commissions.

    If you are making a back payment or arrears payment, it may be included as bonuses and commissions.

    The following table outlines some examples of what should and shouldn't be included in Bonuses and commissions.

    Bonuses and commissions reporting examples

    Include

    Don't include

    • Christmas bonus
    • retention bonus
    • sign-on bonus for new employees
    • performance bonus
    • referral bonus
    • bonus labelled as ex-gratia but in respect of ordinary hours work
    • return-to-work bonus after parental leave
    • commission payment 

     

    • bonuses and commissions that relate entirely to work performed outside normal hours – these are reported as overtime

     

    Directors’ fees

    If you pay directors’ fees you must separately include these in your STP Phase 2 report.

    Directors’ fees include payments to:

    • the director of a company
    • a person who performs the duties of a director of the company
    • a member of the committee of management of the company, or as a person who performs the duties of such a member if the company is not incorporated.

    Directors’ fees may include payment to cover travelling costs, costs associated with attending meetings and other expenses incurred in the position of a company director.

    Only pre-sacrifice amounts that are classified as OTE should be included as directors’ fees.

    If you are making a back payment or arrears payment, it may be included as directors’ fees.

    The following table outlines some examples of what should and shouldn't be included in Directors’ fees.

    Directors' fees reporting examples

    Include

    Don't include

    • remuneration you pay to a working director
    • remuneration you pay to a non-working director 

     

     

    Lump sum W (return to work payment)

    A return to work amount is paid to induce an employee to resume work. For example, to end industrial action or to return from working for another employer. This is a new category of lump sum payments which is being introduced as part of STP Phase 2. Previously, they were reported as gross and not separately identified.

    Only pre-sacrifice amounts that are classified as OTE should be included as lump sum W.

    If you are making a back payment or arrears payment, it may be included as lump sum W.

    The following table outlines some examples of what should and should not be included in Lump sum W.

    Lump sum W reporting examples

    Include

    Don't include

    • bonus paid to an ex-employee to encourage them to return to the employer
    • bonus payments made to end industrial action and have employees resume work
    • bonus paid to an employee who has resigned and is encouraged to withdraw their resignation 

     

    • sign-on bonus for new employees – this is reported as Bonuses and commissions
    • payments to employees returning to work after workers’ compensation 

     

    Allowances

    In Phase 1 reporting, some allowances are reported separately, and some are reported as part of Gross.

    You will now need to report all allowances separately in your STP Phase 2 report across most income types, not just expense allowances that may have been deductible on your employee’s individual tax return. This means that allowances previously reported as gross must now be separately itemised and reported.

    Don't report:

    • reimbursements    
      • these are an amount that reimburses an expense which was (or will be) incurred by the employee in the course of their duties and can be verified by receipts
      • some reimbursements may be subject to FBT
       
    • fringe benefits    
      • these are not amounts that you are paying to your employee.
       

    The allowance types you will separately report in STP Phase 2 are:

    Cents per km allowance (allowance type CD)

    This applies to deductible expense allowances paid to employees using their own car at a set rate for each kilometre travelled for business purposes that represents the vehicle running costs including registration, fuel, servicing, insurance and depreciation.

    The following table outlines some examples of what should and shouldn't be included in Cents per km allowance.

    Centres per km allowance reporting examples

    Include

    Don't include

    • cents per km payments for a car up to the ATO rate and limit for business related travel
    • cents per km payments for a car in excess of the ATO rate and limit for business related travel 

     

    • cents per km payments for private travel such as travel between home and work – this should generally be reported as other allowances (allowance type OD) with the description ND (non-deductible)
    • cents per km payments for vehicles other than a car such as a motorbike or van – this should be reported as other allowances (allowance type OD) with the description V1 (private vehicle)
    • flat rate car allowance that is not referable to kilometres travelled – this should be reported as other allowances (allowance type OD) with the description V1 (private vehicle) 

     

    Award transport payments (allowance type AD)

    Award transport payments are deductible expense allowances for the total rate specified in an industrial instrument to cover the cost of transport (excluding travel or cents per kilometre reported as other separately itemised allowances) for business purposes, as defined in section 900-220 of the Income Tax Assessment Act 1997.

    The current award transport payment must be traceable to an award in force on 29 October 1986.

    The following table outlines some examples of what should and shouldn't be included in Award transport payments.

    Award transport payments reporting examples

    Include

    Don't include

    • allowance payments for the cost of transport for business related travel traceable to a historical award in force on 29 October 1986

     

    • allowance payments for the cost of transport for business related travel not traceable to a historical award in force on 29 October 1986 – this should be reported as other allowances (allowance type OD) with the description T1 (transport or fares)
    • allowance payments for the cost of transport for private purposes – this should be reported as other allowances (allowance type OD) with the description ND (non-deductible)
    • cents-per-kilometre allowances – this should be reported as cents per kilometre allowance (allowance type CD)

     

    For more information see Claiming a deduction for car expenses – award transport payments.

    Laundry allowance (allowance type LD)

    This is a deductible expense allowance paid to employees for washing, drying and ironing uniforms required for business purposes.

    You should only include laundry allowances for the cleaning of clothing that falls into one or more of the following categories:

    • Compulsory uniform – unique and distinctive to identify the employer with a strictly enforced policy that makes it compulsory for the uniform to be worn at work.
    • Non-compulsory uniform – only if the design of the uniform has been entered on the Register of approved occupational clothing.
    • Occupation-specific clothing – that isn't everyday in nature and allows the public to easily recognise the occupation.
    • Protective clothing and footwear – to protect against the risk of illness or injury posed by the activities undertaken to earn the income.

    The following table outlines some examples of what should and shouldn't be included in Laundry allowance.

    Laundry allowance reporting examples

    Include

    Don't include

    • laundry allowance for cleaning of approved uniforms up to the ATO approved limit
    • laundry allowance for cleaning of approved uniforms in excess of the ATO approved limit 

     

    • laundry allowances for the cost of laundering deductible conventional clothing – this should be reported as other allowances (allowance type OD) with the description G1 (general).
    • laundry allowance for the cost of laundering uniforms for private purposes – this should be reported as other allowances (allowance type OD) with the description ND (non-deductible) 

     

    Overtime meal allowance (allowance type MD)

    This applies to deductible expense allowances defined in an industrial instrument that are in excess of the ATO reasonable amount, paid to compensate the employee for meals consumed during meal breaks connected with overtime worked.

    The following table outlines some examples of what should and shouldn't be included in Overtime meal allowance.

    Overtime meal allowance reporting examples

    Include

    Don't include

    • overtime meal allowances that exceed the ATO reasonable amount

     

    • overtime meal allowances paid up to the ATO reasonable amount – this payment continues to be exempt from PAYG withholding and from STP reporting

     

    Domestic or overseas travel allowances and overseas accommodation (allowance type RD)

    This applies to deductible expense allowances that are paid for domestic or overseas meals and incidentals and domestic accommodation, undertaken for business purposes, which is intended to compensate employees who are required to sleep away from home.

    It is not a reimbursement of actual expenses, but a reasonable estimate to cover costs including meals, accommodation and incidental expenses.

    You only need to report allowances that exceed the ATO reasonable amount.

    Don't report allowances paid up to the ATO reasonable amount. This payment continues to be exempt from PAYG withholding and STP reporting.

    The following table outlines some examples of what should and shouldn't be included in Domestic or overseas travel allowances and overseas accommodation.

    Domestic or overseas travel allowances and overseas accommodation reporting examples

    Include

    Don't include

    • allowance that exceeds the ATO reasonable amount for domestic or overseas meals and incidentals and domestic accommodation, undertaken for business purposes, which is intended to compensate employees who are required to sleep away from home 

     

    • allowance that does not exceed the ATO reasonable amount for domestic or overseas meals and incidentals and domestic accommodation, undertaken for business purposes, which is intended to compensate employees who are required to sleep away from home – this is not reported at all through STP
    • allowance that is paid for overseas accommodation for business purposes where the employee is required to sleep away from home – this should be reported as other allowances (allowance type OD) with the description G1 (general)
    • part-day travel allowances – this should be reported as other allowances (allowance type OD) with the description ND (non-deductible)
    • allowances paid for travel that is for private purposes – this should be reported as other allowances (allowance type OD) with the description ND (non-deductible) 

     

    Tool allowance (allowance type TD)

    This applies to deductible expense allowances to compensate an employee who is required to provide their own tools or equipment for business purposes. This allowance was formerly required to be reported under other allowances with a description of the allowance type.

    The following table outlines some examples of what should and shouldn't be included in Tool allowance.

    Tool allowance reporting examples

    Include

    Don't include

    • tool allowances paid to trades staff who are required by their employer to supply and maintain their own tools of trade
    • allowances paid to an employee required to supply equipment for business purposes 

     

    • home office equipment – this should be reported as other allowances (allowance type OD) with the description H1 (home office)
    • internet allowances – this should be reported as other allowances (allowance type OD) with the description H1 (home office)
    • private purposes – this should be reported as other allowances (allowance type OD) with the description ND (non-deductible) 

     

    Qualification and certification allowances (allowance type QN)

    This applies to deductible expense allowances that are paid for obtaining or maintaining a qualification, which is evidenced by a certificate, licence or similar, and is required to perform the work or services. For example, this includes allowances to cover registration fees, insurance, licence fees, which are expected to be expended to maintain a requirement of the job.

    It doesn't include allowances paid for performing additional duties just because those duties require a qualification or certificate. It also does not include a direct reimbursement of the cost.

    The following table outlines some examples of what should and shouldn't be included in Qualification and certification allowance.

    Qualification and certification allowance reporting examples

    Include

    Don't include

    • allowances paid to contribute to the cost of obtaining and maintaining a working with children check
    • ambulance drivers are entitled to a driving licence allowance to cover the cost of maintaining their non-standard drivers licence
    • air pilots are entitled to a loss of licence allowance to help the pilot to hold adequate insurance against loss of licence
    • under the general retail award, employees that are required to maintain a liquor licence are entitled to a liquor licence allowance 

     

    • first aid allowance – this allowance is for performing duties as a first aider and should be reported as task allowance (allowance type KN)
    • allowances paid to recognise a higher level of skill, rather than an allowance to get or maintain a qualification itself – this should be reported as task allowance (allowance type KN

     

    Task allowances (allowance type KN)

    This applies to a services allowance that is paid to compensate an employee for specific tasks or activities performed that involve additional responsibilities, inconvenience or circumstances above the base rate of pay.

    These allowances were included in gross in STP Phase 1 reporting but are now required to be reported separately.

    It doesn't include allowances paid for obtaining or maintaining a qualification even if the qualification is a pre-requisite for performing the task.

    Awards and enterprise agreements contain many different types of task allowances.

    The following table outlines some examples of what should and shouldn't be included in Task allowance.

    Task allowance reporting examples

    Include

    Don't include

    • additional responsibilities
    • first aid allowance
    • leading hand allowance
    • higher duties
    • supervisor allowance
    • on call during ordinary hours allowance
    • inconvenience or disability
    • height allowance
    • dirt allowance
    • danger allowance
    • wet weather allowance
    • confined spaces allowance
    • other circumstances
    • all-purpose allowance
    • industry allowance
    • site, district or locality allowance
    • secondment
    • recognition of skill level 

     

    • shift allowance or penalty – this should be reported as gross
    • travel time allowance during ordinary hours – this should be reported as gross
    • travel time allowance outside of ordinary hours – this should be reported as overtime
    • on-call allowance outside of ordinary hours allowance – this should be reported as overtime
    • expense allowances 

     

    Other allowances (allowance type OD)

    These are other allowances that are not otherwise separately itemised. These can either be deductible or non-deductible expenses.

    Anything you report as another allowance needs to have a description for the category of expense. These categories will help us assist each of your employees to complete their individual tax returns.

    The descriptions you can use are:

    • G1 (general)
    • H1 (home office)
    • ND (non-deductible)
    • T1 (transport or fares)
    • U1 (uniform)
    • V1 (private vehicle).

    The following table outlines some examples of what should and should not be included in Other allowances.

    Other allowances reporting examples

    Include

    Don't include

    G1 (general)

    • laundry allowances for the cost of laundering deductible conventional clothing

    H1 (home office)

    • home office equipment allowances
    • internet allowances

    ND (non-deductible)

    • cents per km payments for private travel such as travel between home and work
    • allowance payments for the cost of transport for private purposes
    • laundry allowance for the cost of laundering uniforms for private purposes
    • allowances paid for travel that is for private purposes
    • part-day travel allowances
    • allowances paid in relation to equipment used for private purposes

    T1 (transport or fares)

    • Allowance payments for the cost of transport for business related travel not traceable to a historical award in force on 29 October 1986

    U1 (uniform)

    • allowances paid for the purchase of a uniform

    V1 (private vehicle)

    • cents per km payments for vehicles other than a car such as a motorbike or van
    • flat rate car allowance that is referable to the kilometres travelled 

     

    • direct reimbursement of business expenses – this is not reported
    • living away from home allowance – this falls under the FBT legislation and is not reported here
    • tool allowances – this should be reported as tool allowances (allowance type TD)
    • cents per kilometre – this should be reported as cents per km allowance (allowance type CD)
    • qualification and certificate allowances – this is reported in qualification and certification allowances (allowance type QN

     

    These category descriptions don't apply where we tell you to use a specific description, for example in administering programs like JobKeeper Payment.

    Back pays

    Sometimes there may have been an oversight or delay and you need to make a back payment to an employee. In some cases, this may be a lump sum E payment.

    If you are making a back payment to an employee and it is not lump sum E, then report it in STP as the relevant payment type (such as gross or overtime).

    Lump sum E

    Lump sum E is an amount of back payment of remuneration that accrued, or was payable, more than 12 months before the date of payment and is greater than or equal to the Lump sum E threshold amount ($1,200).

    Your payroll solution may report Lump sum E:

    • in each STP report, or
    • only when you finalise your reporting at the end of the financial year.

    Both ways are acceptable.

    You must report Lump sum E YTD amounts by specifying each prior financial year to which the amount relates.

    When you report lump sum E payments, you will no longer need to issue employees with a lump sum E letter at the end of the financial year. This information will now be available on their income statement.

    The following table outlines some examples of what should and shouldn't be included in Lump sum E.

    Lump sum E reporting examples

    Include

    Don't include

    • back payments which accrued, or were payable, more than 12 months before the date of payment and are greater than or equal to the lump sum E $1,200 threshold

     

    • back payments that total below the lump sum E threshold
    • back payments that accrued or were payable less than 12 months before the date of payment 

     

     

    Example: lump sum E reporting

    Ross' employer identified on 15 February 2022 that Ross has not been paid his higher duties allowance for the past 22 months totalling $3,300 due to an administration error. Using the normal ATO backpay rules, the pay office has split the payment into the following categories:

    • The past 12 months of backpay (15 February 2021 to 15 February 2022) totals $1,800. This is taxed and reported in the current financial year. As the backpay is for an allowance, it will be reported in the appropriate allowance field.
    • The amount that is greater than 12 months old (14 February 2021 and earlier) totals $1,500 which means it must be reported as Lump sum E because it is greater than the lump sum E threshold of $1,200. The Lump sum E component must be allocated to the appropriate financial year. $600 relates to the 2020–21 financial year and $900 relates to the 2019–20 financial year.

    This is reported in STP Phase 2 as follows:

    • KN tasks $1,800
    • Lump sum E 2021 $600
    • Lump sum E 2020 $900.

    Ross’ employer does not need to provide him with a letter as the lump sum E amounts have been allocated to the appropriate financial years in the STP report.

    End of example

    Exempt foreign employment income

    Any amount you pay to an employee that is exempt foreign employment income must be reported as exempt foreign employment income.

    You must report these amounts even if they are the only income paid to the employee for the financial year. This is a new reporting requirement for STP Phase 2. It was not required to be reported under previous reporting phases such as STP Phase 1 or payment summaries.

    If the employee’s foreign service qualifies as exempt foreign income, it is not subject to withholding and must be reported in STP Phase 2 against the income type SAW as exempt foreign income.

    Exempt foreign employment income is the exception to the reporting of pre-sacrificed amounts. You must only report post-sacrifice amounts as exempt foreign employment income, and you must not report any amount sacrificed from exempt foreign employment income as salary sacrifice in your STP report.

    If the employee’s foreign service does not qualify as exempt foreign income, it must be reported against the income type FEI.

    Salary sacrifice

    You must separately report salary sacrificed amounts.

    When reporting salary sacrificed amounts, there are 2 new types to report:

    • super (salary sacrifice type S) – for super to a complying fund or retirement savings account (RSA)
    • other employee benefits (salary sacrifice type O) – for benefits other than super.

    If your employee has an effective salary sacrifice arrangement, you have previously reported post-sacrifice amounts to us. This changes as part of STP Phase 2. You now to need to report the salary sacrifice amounts and separately report the pre-sacrificed income amounts in your STP report.

    You must not report amounts sacrificed from exempt foreign employment income as salary sacrifice in your STP report.

    Example 1: reporting pre-sacrificed income

    Adam earns $60,000 per annum and would like to sacrifice $3,000 into superannuation.

    In STP Phase 1 you reported the post-sacrificed income of $57,000.

    In STP Phase 2 you are required to report the pre-sacrificed income as well as the amount of salary sacrifice. This is how you should report this in STP Phase 2:

    • gross: $60,000
    • salary sacrifice type S (superannuation): $3,000.

    This new method of reporting will show that Adam’s full income is $60,000 with $3,000 being sacrificed to superannuation, leaving a taxable income of $57,000.

    End of example

     

    Example 2: reporting both types of salary sacrifice

    Anita earns $100,000 and sacrifices $5,000 into superannuation and $20,000 to a novated lease.

    In STP Phase 1 you reported the post-sacrificed income of $75,000.

    In STP Phase 2 you are required to report the pre-sacrificed income as well as the amount of salary sacrifice. This is how you should report this in STP Phase 2:

    • gross: $100,000
    • salary sacrifice type S (superannuation): $5,000
    • salary sacrifice type O (other employee benefits): $20,000.

    This new method of reporting will show that Anita’s full income is $100,000 with $5,000 being sacrificed to superannuation and $20,000 being sacrificed to other employee benefits, leaving a taxable income of $75,000.

    End of example

    What is an effective salary sacrifice arrangement?

    An effective salary sacrifice arrangement is one where the approved agreement between the employer and employee is in place before the payments to be sacrificed have been accrued, earned or are payable.

    Salary sacrifice super (salary sacrifice type S)

    You should include salary sacrifice to a complying super fund or RSA from an effective salary sacrifice arrangement.

    The following table outlines what should and shouldn't be included in Super salary sacrifice (salary sacrifice type S).

    Super salary reporting examples

    Include

    Don't include

    • amounts sacrificed to a complying super fund or RSA due to an effective salary sacrifice agreement

     

    • compulsory SG – this should be reported as Super liability
    • additional extra super paid at the employer's discretion – this should be reported as super liability and may also be included in reportable employer super contributions (RESC)
    • non-effective salary sacrifice arrangements – this should be reported as gross

     

    Salary sacrifice other employee benefits (salary sacrifice type O)

    You must include salary sacrifice of all benefits from an effective salary arrangement. This includes where the sacrifice relates to benefits that are exempt from FBT, such as living-away-from-home allowance and laptops used primarily for business purposes.

    The following table outlines what should and shouldn't be included in Other employee benefits salary sacrifice (Salary sacrifice type O).

    Salary sacrifice other employee benefits reporting examples

    Include

    Don't include

    • benefits from an effective salary sacrifice agreement including:        
      • novated leases
      • airline lounge memberships
      • portable electronic devices 
       

     

    • non-effective salary sacrifice arrangements – this should be reported as gross
    • employee benefits given to an employee that have not been sacrificed such as entertainment fringe benefits 

     

    Tax that has been withheld or paid

    The kinds of payments you need to report are also payments which are part of the PAYG withholding system. This means you are required to withhold amounts from these payments and pay the amount you have withheld to us. In some cases, you may also need to pay tax to a foreign government or tax authority. You need to include these amounts.

    PAYG withholding

    You must report the amounts you withhold from payments you make to employees. You must include separate YTD amounts you have withheld from each income type (and for income types that require a country code, for each combination of income type and country code).

    If you are reporting amounts you have withheld from payments you are reporting against the FEI income type, you must only report the residual amount withheld after the deduction of foreign tax paid. If you do not know the amount of foreign tax on or before each payday, you must report the full amount of PAYG withholding. When you know the amount of foreign tax you can correct your STP reporting so that you are reporting the residual amount.

    Foreign tax paid

    If you have paid amounts to an employee that you are reporting against the FEI income type, there are rules for reporting foreign employment income. One of these rules is that you must report the amount of foreign tax that you have paid or are required to pay to a foreign government or authority.

    This amount must be included in your STP reporting during the same financial year as the payment is reported even if you do not actually pay the foreign tax until after the end of the Australian financial year.

    The amount you report must be in Australian dollars. See how to convert foreign income into Australian dollars.

    If you do not know the amount of foreign tax on or before each payday, then you can report zero or estimate the amount of foreign tax. If you do this, you must still include the correct foreign tax amount in your STP report when you finalise your reporting at the end of the financial year.

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    Last modified: 11 Apr 2022QC 66099