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  • The rules of reporting through STP

    There are some rules for reporting through STP. This section explains those rules.

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    Requirements for an STP report

    An STP report must meet some minimum requirements. Your payroll solution will ensure you meet them, as you will not be able to lodge your STP report otherwise.

    The minimum requirements for an STP report are:

    • Your STP report must contain at least one employee record.
    • Your STP report can only include one record per payee identity (combination of Payroll ID and payee details such as TFN, name, date of birth)          
      • if you establish 2 payroll records for an individual, you can report these payments within the same pay event by using unique Payroll IDs
      • you must report separate YTD amounts for each unique Payroll ID for an employee.
       
    • You must report period gross salary or wages (BAS label W1) and PAYG withholding (BAS label W2) for all employee payments included in that pay event. These amounts          
      • are your 'employer-level amounts'
      • may be negative because of fixes you've made
      • would generally correspond to the amounts you posted to your general ledger for the pay run.
       
    • If your payroll solution offers the functionality to report child support amounts and you choose to use it, you must also include your total period amounts for each child support type.

    When your STP report is due

    Your STP report is due on or before the pay day. The pay day is either the payment date stipulated in the electronic transaction to your financial institution or, if you did not specify a date for payment, the date you intend to make the payment into your employee's bank account.

    You may lodge multiple STP reports on the same day. Your system will generate a time stamp to identify the latest record for each financial year and ensure the employee’s myGov display recognises the latest record.

    There are concessional reporting arrangements which provide a later due date in some circumstances.

    Out-of-cycle reporting

    You may make payments to employees other than as part of their regular pay cycle, for example when you pay commissions, bonuses, payments in advance or back payments to your employees.

    These payments may be reported by either:

    • lodging a pay event on or before the pay day you made the payment
    • including the out-of-cycle payment made to the employee in the next regular pay event you lodge if your payroll solution offers this functionality. If the next regular pay cycle is in the following financial year, you must report the payment by 30 June in the year the payment was made before you finalise.

    This is distinct from an ad hoc payment that is generally either run as a calculation simulation or as an advance of the regular salary (which is deemed as a loan) and should be reported at the time the actual salary is calculated.

    Example: out-of-cycle reporting

    A software company pays its employees monthly. The employment agreement stipulates that employees should receive their pay on the 15th of every month.

    On 30 March, Matthew, an employee of the company, earns a commission of $1,000. On 31 March, the company processes Matthew's commission through payroll.

    The company has 2 options to report the payment made to Matthew, either:

    • report this payment to Matthew through a separate pay event (that is, not the regular 15th of the month pay event)
    • include the commission payment to Matthew when it lodges the next regular pay event (the pay event with the pay date 15 April).

    Note: Some STP-enabled solutions may not offer both options.

    End of example

    Who you include in your STP report

    Your STP report must include each employee you've made a payment to that is mandatory for you to report.

    Your STP report may also include information for other employees, such as:

    • those you've made a payment to that is voluntary to report
    • those who've been reported earlier during the financial year but did not receive a payment for this pay period.

    Payments you must report

    Under STP, some payments subject to withholding are in scope and some are out of scope. These have not changed under STP Phase 2 reporting.

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    Mandatory reporting

    There are some withholding payments that are required to be reported under STP. They are generally paid through a payroll process by employers to their employees.

    If you report these payments (and amounts withheld from them) throughout the year and finalise your STP data you will not need to provide the corresponding payment summaries to your employees or a PAYG withholding payment summary annual report to us.

    Table 1: Mandatory reporting of gross payment or amount withheld (BAS labels W1 and W2)

    Description

    BAS labels (gross payment, amount withheld)

    Payment summary type

    A payment to an employee, such as salary or wages

    W1, W2

    INB (except INB-P) or FEI

    A payment of remuneration to the director of a company

    W1, W2

    INB (except INB-P) or FEI

    A payment to an office holder (for example, a member of the Defence Force)

    W1, W2

    INB (except INB-P) or FEI

    A payment to a religious practitioner

    W1, W2

    INB (except INB-P) or FEI

    A return to work payment to an individual

    W1, W2

    INB (except INB-P) or FEI

    A payment for termination of employment

    W1, W2

    ETP (life benefit)

    An unused leave payment

    W1, W2

    INB (except INB-P) or FEI

    A payment of parental leave pay

    W1, W2

    INB (except INB-P)

    A payment to an employee under certain Labour Mobility Program

    W1, W2

    INB (except INB-P)

    INB: PAYG payment summary – individual non-business (NAT 0046)
    INB-P: Individual non-business (pension)
    FEI: PAYG payment summary – foreign employment (NAT 73297)
    ETP: PAYG payment summary – employment termination payment (NAT 70868)

    You must lodge a pay event even if the amount you were required to withhold from any of these payments was nil.

    Voluntary reporting

    You may choose to include voluntary reporting amount in your STP reports. These are not mandatory.

    Reporting voluntary amounts through STP may help to streamline your reporting and compliance processes because it can replace other reporting requirements, such as payment summaries.

    Table 2: Withholding payments that are voluntary to report of gross payment or amount withheld (BAS labels W1 and W2)

    Description

    Current BAS labels (gross payment, amount withheld)

    Payment summary type

    A payment that is covered by a voluntary agreement

    W1, W2

    Business and personal services income – 003

    A payment under a labour hire arrangement or a payment specified by regulations

    W1, W2

    Business and personal services income – 001 or 002

    A payment for termination of employment

    W1, W2

    ETP (death benefit)

    PAYG payment summary – business and personal services income (NAT 72545)
    ETP: PAYG payment summary – employment termination payment (NAT 70868)

    You can also choose to include:

    • RESC
    • RFBA
    • child support deduction amounts
    • child support garnishee amounts.

    If you choose to include RESC and RFBA in an STP report by 14 July in the next financial year and complete a finalisation declaration, you don't have to give payment summaries to your employees covering these amounts. You don't need to lodge a payment summary annual report covering these amounts.

    If you choose to include child support deduction or child support garnishee amounts, you may no longer need to provide separate reporting directly to the Child Support Registrar, via your previously preferred reporting channel.

    Payments that can't be reported through STP

    Some payments can't be reported through STP.

    These include:

    • payments that are generally not paid through a payroll process
    • payments made by payers to recipients that are generally not their employees, such as          
      • Services Australia
      • investment bodies and managed investment funds
      • purchasers of certain taxable Australian property.
       

    Payers must continue to provide payment summaries and lodge a payment summary annual report for these withholding payments.

    In addition, a payer can't include any payment made through payroll solution that is not a withholding payment – for example, partnership distributions and payments to suppliers.

    Payments that can't be reported through STP

    Description

    Current BAS labels (gross payment, amount withheld)

    Payment summary or annual report

    A super income stream or an annuity

    W1, W2

    PEN or INB-P

    A super lump sum

    W1, W2

    SLS

    A social security or similar payment

    W1, W2

    INB

    A compensation, sickness or accident payment

    W1, W2

    INB

    Payment of income of closely held trust where tax file number (TFN) not quoted

    Annual activity statement

    Closely-held trust or Annual TFN withholding report

    Recipient does not quote Australian Business Number (ABN)

    W4

    ABN or No ABN, AIIR

    Dividend, interest and royalty payments

    W3

    n/a or non-residents, AIIR

    Departing Australia superannuation payment

    W3

    DASP

    Excess untaxed roll-over amount

    W3

    n/a

    A payment to a foreign resident

    W3

    Free format or Foreign residents

    Payments in respect of mining on Aboriginal land, and natural resources

    Electronic payment

    Free format

    Distributions of withholding MIT income

    W3

    Free format or AIIR

    Distributions by AMITs (including deemed payments)

    W3

    Free format (for example, AMMA statement), AIIR

    Alienated personal services payments

    W1, W2

    Business and personal services income – 004

    Non-cash benefits, and accruing gains, for which amounts must be paid to the Commissioner, except subdivisions 14-C and 14-D

    W3 or Electronic payment

    Most applicable

    Shares and rights under employee share schemes (ESS)

    W1, W2, where TFN quoted

    W3 only, where TFN not quoted

    ESS

    Capital proceeds involving foreign residents and taxable Australian property

    Electronic payment

    n/a

    PEN: Super income stream
    SLS: Super lump sum
    AIIR: Annual investment income report,
    DASP: Departing Australia superannuation payment
    AMMA statement: Annual attribution MIT member statement
    ESS: Employee share scheme.
    Contractors

    Payments made to contractors are not mandatory to report under STP. However, if you currently report contractors through your payroll solution, you should continue to do so under STP.

    If you report payments to contractors and you have a voluntary agreement to have withholding applied, you don't need to provide a payment summary to these contractors.

    If the contractors are managed outside of payroll using accounts payable you don't have to report payments to them under STP.

    Rules for reporting amounts

    Your STP report includes YTD amounts of salary or wages, allowances or other payments (as relevant), deductions and PAYG withholding for each employee included in that pay event.

    These YTD amounts may be less than a previous report (for example, recovery of a current year overpayment) or can be zero.

    There are limited circumstances where YTD amounts for specific payment types are negative, typically where corrections cross financial years (such as refunds of salary sacrifice) or cross related payers. This can result in some of the YTD amounts you need to report through STP also being negative.

    If this occurs, YTD amounts can be negative when they are reported for:

    • gross
    • paid leave
    • allowances
    • overtime
    • bonuses and commissions
    • directors' fees
    • lump sum type W
    • salary sacrifice.

    If any of the YTD amounts you report are negative, the overall amount of income for each income type you report in your STP report must still be zero or positive. This means that for each income type the total of Gross, Paid leave, Allowances, Overtime, Bonuses and commissions, Directors’ fees and Lump sum W, less salary sacrifice, must be zero or positive. Your solution will ensure you meet this requirement.

    Not all amounts can be reported for all income types. The following table shows the amounts that can be reported against each income type.

    Reporting available by income types

    Income type

    SAW

    CHP

    IAA

    WHM

    SWP

    FEI

    VOL

    LAB

    OSP

    PAYGW

    Yes

    Yes

    Yes

    Yes

    Yes

    Yes

    Yes

    Yes

    Yes

    Foreign tax

    No

    No

    No

    No

    No

    Yes

    No

    No

    No

    Exempt foreign Income

    Yes

    No

    No

    No

    No

    No

    No

    No

    No

    Gross

    Yes

    Yes

    Yes

    Yes

    Yes

    Yes

    Yes

    Yes

    Yes

    Paid leave payment

    Yes

    Yes

    Yes

    Yes

    Yes

    Yes

    No

    No

    No

    Allowances

    Yes

    Yes

    Yes

    Yes

    Yes

    Yes

    No

    No

    No

    Overtime

    Yes

    Yes

    Yes

    Yes

    Yes

    Yes

    No

    No

    No

    Bonuses and commissions

    Yes

    Yes

    Yes

    Yes

    Yes

    Yes

    No

    No

    No

    Directors' fees

    Yes

    Yes

    Yes

    No

    No

    Yes

    No

    No

    No

    Salary sacrifice

    Yes

    Yes

    Yes

    Yes

    Yes

    Yes

    No

    No

    No

    Lump sum payment

    Yes

    Yes

    Yes

    Yes

    Yes

    Yes

    No

    No

    No

    Employment termination payment

    Yes

    Yes

    Yes

    Yes

    Yes

    Yes

    No

    No

    No

    Rules for reporting foreign employment income

    The classification of payments made to employees working in foreign countries depends on a number of factors, such as the time spent in the foreign country and the applicable tax treaties.

    These rules detail how you can report and adjust these payments through STP:

    • Payments to an employee posted to a foreign country should be reported using the foreign employment income (FEI) income type if amounts are withheld in that country.
    • If no amounts are withheld for the foreign country, payments should be reported using the relevant other income type (such as salary and wages (SAW)).
    • Employers should follow the Accounting for foreign tax instructions.

    You must report payments made to employees posted overseas throughout the year, and foreign tax, and make adjustments as required. These adjustments can be reported in either a pay event or update event. The adjustments can be done throughout the year or at the end as part of the finalisation process.

    You can use one or a combination of the following 3 methods to report:

    1. Estimates – if you believe the employee will remain overseas for the qualifying period, treat that employee as earning foreign income from the beginning. If the employee’s status changes, adjust the employee's year-to-date figures accordingly. For example, if your employee is working overseas for a year and the payments are subject to withholding in that country, apply the withholding rate for that country from the beginning.
    2. Actual – treat the employee as earning foreign income from the time they qualify for withholding in the foreign country.
    3. Reconciliation – treat the employee as an employee working in Australia for the financial year and then reconcile the payments and withholding at the end of the financial year.

    Reporting based on your current business structure

    Your payroll solution will generate your STP report for your pay cycle by ABN, branch and business management software (BMS) ID. We use this combination of information, together with the Payroll IDs you report, to identify when we need to display a separate income statement to your employee.

    Some businesses structure their payroll so that the same person may be paid by different combinations of ABN, branch and BMS ID. They may also have multiple Payroll IDs in the same payroll solution that relate to the same person (for example, where the person performs multiple jobs).

    This section explains some of the circumstances where this occurs.

    PAYG withholding branches

    Some business entities register PAYG withholding branches to suit the structural, management and accounting arrangements of the organisation. When an entity registers a branch, it must report and pay PAYG withholding separately for each branch.

    If you have registered multiple PAYG withholding branches, you must conduct your STP reporting separately for each branch.

    Multiple payroll solutions

    If you currently use multiple payroll solutions, you can report separately from each payroll solution. This will be identified by the payroll solution via a unique BMS ID, which forms part of the STP report.

    Most products will allocate the BMS ID for you as part of making their products STP-enabled. If you have more than one payroll solution, you will need to ask your DSP about your BMS ID.

    When the employee’s payer changes

    Your employee may have income attributed to different ABNs, branches, and BMS IDs during a financial year. If this is the case, each combination will result in a separate income statement displayed on the employee’s myGov account.

    You must finalise each income statement (that is the combination of ABN, branch and BMS ID and Payroll ID). You can choose whether you finalise the income statement during the year or at the end of the year (by 14 July). However, you should consider whether:

    • your previous ABN or branch will still be active. You cannot finalise your STP reporting if the ABN or branch has been cancelled
    • you will still have authorisation to report on behalf of your previous ABN or branch
    • you will still have access to the payroll solution you reported from.

    If your business structure changes, the ABN and branch under which you have been generating your STP reporting may change. If this occurs, you must:

    • finalise your STP reporting under the ABN and branch you have been using for your STP reporting. You can choose whether you do this before you start reporting for the new ABN and branch or later (up until 14 July). However, you should consider whether          
      • your previous ABN or branch will still be active. You cannot finalise your STP reporting if the ABN or branch has been cancelled
      • you will still have authorisation to report on behalf of your previous ABN or branch
      • you will still have access to the payroll solution you reported from
       
    • start your STP reporting under the new ABN and branch using zero YTD employee amounts.

    Example 1: partnership to company

    Amy, Joanna and Remy run a small furniture manufacturing business as equal partners. They report monthly wage payments for 20 employees through their STP-enabled payroll software.

    In the 2020–21 financial year, they decide they want to transfer their interests in the assets of the partnership to a company. This is to occur on 1 March 2021.

    When making and reporting via STP their February 2021 monthly wage payments, they make a finalisation declaration to finalise their STP reporting under the partnership's ABN.

    As part of the restructure, Amy, Joanna and Remy's employees become employed by the company from 1 March 2021. Therefore, the company reports its March 2021 wage payments under the company's ABN, starting from zero YTD employee amounts.

    In their 2020–21 tax returns, the employees will see 2 records – one listed against the partnership (for the period 1 July 2020 – 30 April 2021), the other against the company (for the period 1 March – 30 June 2021).

    End of example

     

    Example 2: employee starts to work for a different branch

    Priya is employed by a small mining company as a project manager in their main business. The company reports the fortnightly salary paid to Priya through STP throughout the year from its ABN and main reporting branch.

    In the 2021–22 financial year the company enters into a joint venture. The joint venture will commence on 1 April 2022 and the company establishes a new branch for their ABN to keep their joint venture reporting separate from their main business.

    Priya begins to work solely on the joint venture. Her salary starts to be paid by the joint venture branch from 1 April 2022. Therefore, the joint venture branch reports the salary paid to Priya through STP.

    When she logs in to myGov to complete her 2021–22 tax return Priya will see 2 income statements displayed, even though she has only worked for the same mining company during the year. This is because she was paid by more than one combination of ABN and branch:

    • One income statement shows the salary paid to Priya when she was working for the main branch before 1 April 2022.
    • The other income statement shows the salary paid to Priya when she was working for the joint venture branch after 1 April 2022.
    End of example

    Multiple employee records

    We use a combination of the employee identity information you supply (such as their TFN, name and date of birth) and the Payroll ID to match your STP report to the correct ATO taxpayer record so we can display the employee's information in their income statement.

    Where an employee is recorded more than once under the same ABN, branch and BMS ID then each payroll record of the employee must be reported using a unique payee Payroll ID. This is so we can identify for which taxpayer you are reporting separate payroll records and display the correct information. Each Payroll ID must have separate YTD amounts reported.

    For example, where an employee works within an organisation under 2 separate roles or awards and has been created as if they are 2 unrelated employees, the employee can be reported under multiple payee Payroll IDs within a single pay event.

    Some payroll solutions may use the same Payroll ID for more than one person, such as where the second person is a death beneficiary of the person originally assigned that Payroll ID. In this situation you must ensure that you report unique payee identity information so that we can match the STP report to the correct person’s ATO taxpayer record.

    Remitting PAYG withholding

    If you notify your PAYG withholding liability on an activity statement, you should continue to follow your existing processes. If you are a large withholder you must continue to pay the amounts you withhold to us electronically.

    Note: If you are a large withholder, follow your existing process. See When to pay and report on activity statements.

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    Last modified: 14 Jul 2022QC 66099