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  • Changing your payroll solution or employees’ Payroll IDs during a financial year

    Your payroll solution will generate your STP report for your pay cycle by ABN, branch and 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 a taxpayer. We will display a separate income statement for each combination.

    If you transfer the employee YTD amounts you have reported to a different combination of these things (for example, because you have changed to a different payroll solution), you need to tell us.

    If you don’t tell us, your employees will see duplicate income statements. It also means you're reporting more than your true PAYG withholding liability.

    Changing your payroll solution

    Your STP-enabled payroll solution has a BMS ID that acts like a serial number to tell us which payroll solution sent the STP report. This is important because some payroll arrangements pay employees out of more than one payroll solution at once.

    Some payroll solutions will assign the BMS ID for you and others may allow you to nominate your own BMS ID. Your digital service provider can advise you about this.

    You need to tell us if you change payroll solution and transfer YTD amounts if your payroll solution:

    • assigns the BMS ID for you
    • allows you to nominate a BMS ID and you choose to nominate a BMS ID that is different to your previous payroll solution.

    If your payroll solution allows you to nominate your own BMS ID and you choose to use the same BMS ID as your previous payroll solution, you do not need to tell us. This is because there has been no change to the combination of ABN, branch and BMS ID in your STP reporting.

    Changing your employees’ payroll IDs

    Each employee included in your STP report must have a payroll ID for you to report their YTD amounts to us. If you change their payroll ID and transfer their YTD amounts from their old payroll ID, you need to tell us that you have transferred these amounts.

    This may also occur when you are changing payroll solutions.

    If you don't transfer employee YTD amounts, you don't need to tell us.

    Changing payroll solutions or payroll IDs without transferring YTD amounts

    There may be circumstances where you change payroll solution but do not transfer your YTD amounts to the new solution.

    If you do not transfer employee YTD amounts, you do not need to tell us about any changes.

    We will display a new income statement for the new YTD amounts you report for the new combination of ABN, branch, BMS ID and payroll ID that you report through STP.

    This means that your employee will have multiple income statements. You must finalise your STP reporting for each combination of ABN, branch, BMS ID and payroll ID for your employees, so that we can let your employees know when the information displayed in each of their income statements is tax ready.

    You can finalise your STP reporting at any time during a financial year until 14 July. However, you should consider whether:

    • your previous ABN/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/branch
    • you will still have access to your previous payroll solution.

    If you won't be able to finalise all your STP reporting at the end of the year or you don’t know whether you will be able to, you should finalise your STP reporting when you change your payroll solution or employees’ payroll IDs.

    See also:

    Telling us about changes

    The way you tell us about these changes in STP Phase 1 reporting is to use the zeroing out method.

    You should use the zeroing out method if:

    • your previous software provides this functionality
    • you still have access to your previous software
    • you are correcting an incorrect combination of ABN and branch in your STP reporting.

    Follow these steps when using the zeroing out method:

    1. Before you transfer the YTD amounts to your new payroll solution or your employees’ new payroll IDs, send us an update event that shows all YTD amounts for your employees as zero. This tells us that you are making changes and that we should stop displaying your employees’ current income statement.
    2. Transfer your employee YTD amounts to your new payroll solution or employee payroll IDs and send us an STP report for your employees showing their transferred YTD amounts.

    If you are not able to use the zeroing out method, phone us on 13 28 66.

    What you need to report

    Under STP, some payments subject to withholding are in scope and some are out of scope.

    This section provides the details on these payments, and the impact on business activity statements (BAS), PAYG withholding, payment summaries and annual reports.

    Find out about:

    Mandatory reporting

    These withholding payments 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 complete a finalisation declaration, you will not need to provide the corresponding payment summaries to your employees or a PAYG withholding payment summary annual report to the ATO.

    A finalisation declaration is a declaration in the approved form lodged by 14 July each year, stating you have fully reported for the financial year and for each of your employees using STP. You are then not obliged to give payment summaries to your employees (although you may still choose to) or lodge a payment summary annual report.

    If you don't report and finalise these amounts through STP, you are required to give a payment summary to your employees and lodge a payment summary annual report to the ATO.

    Table 1: Mandatory reporting labels

    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

    ETP1 (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 the Seasonal 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 submit 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 certain withholding payments in your STP reports. These are not mandatory. STP offers the ability to streamline your reporting to help you achieve efficiencies of real-time reporting and help with your compliance processes, compared to having a number of separate reporting processes.

    You can also choose to include reportable employer superannuation contributions (RESC) and reportable fringe benefit amount (RFBA) for your employees. If you choose to include these amounts in a report by 14 July in the next financial year and complete a finalisation declaration you are not obliged to give payment summaries to your employees and lodge a payment summary annual report covering these amounts.

    If you choose not to report these amounts through STP, you will be required to give payment summaries to your employees and lodge a payment summary annual report covering these amounts.

    Table 2: Voluntary reporting labels

    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)

    Cannot be reported

    Some payments cannot 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 cannot include any payment made through payroll software that is not a withholding payment – for example, partnership distributions and payments to suppliers.

    Payments that cannot be reported

    Description

    Current BAS labels (gross payment, amount withheld)

    Payment summary or annual report

    A superannuation income stream or an annuity

    W1, W2

    PEN or INB-P

    A superannuation 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 / 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: Superannuation income stream
    SLS: Superannuation 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 under STP. However, if you currently report contractors through your payroll solution, you should continue to do so under STP.

    Where 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.

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

    See also:

    Last modified: 22 Jul 2021QC 54550