Single Touch Payroll Phase 2 Advisory Group key messages 16 August 2022

Welcome and introductions

Melanie Casey opened the meeting and welcomed members. No conflict of interest declared. The Chair provided some opening remarks.

The ATO’s position on Single Touch Payroll (STP) Phase 2 implementation and transition has not changed from the mandated start date of 1 January 2022. We are working closely with digital service providers (DSPs) to support their readiness.

DSPs who needed more time were able to apply for a deferral, which covers their customers. ATO is not envisaging the need for further grace periods or industry wide extensions.

Many DSPs are tracking well with their product readiness and supporting their customers to STP Phase 2 reporting.

We are unable to share individual product circumstances or details and we continue to encourage DSPs to commence testing early, allowing time for issues resolution and customer transition.

A member noted on behalf of intermediaries there may be a need for ATO to reconsider the option of extensions as we get closer to December to manage industry pressures and expectations. ATO encourages any DSPs who need a deferral or feel they may not meet their readiness date to contact the ATO immediately. Any extensions required will be considered on a case-by-case basis.

Digital service provider readiness and assurance

The ATO tabled a paper on DSP readiness and assurance. As of 31 July – 209 DSP products have been whitelisted for STP Phase 2 noting:

• 179 of these products have customers (employers) that have commenced STP Phase 2 reporting
• 18 DSP products were whitelisted for STP Phase 2 in July 2022 and 33 in June
• 66 products have commenced Extended Conformance Testing (ECT), does not include those already whitelisted.

Most DSPs are tracking well with their product readiness and supporting their customers to STP Phase 2 reporting. Most of the issues we are seeing are product specific.

The ATO’s focus is shifting towards to the quality of data reported in production including the initial Phase 2 production data for newly whitelisted products.

ECT and go-live support

Our current focuses include supporting DSP product readiness for STP Phase 2, as well as go-live support for the increasing number of products with initial production data. This has included prioritising any tax time relevant issues associated with STP Phase 2.

We are continuing to publish and promote content on the education suite for DSPs, including common issues experienced during the conformance testing phase.

We are working with DSPs, in addition to product conformance, for example product enhancements, product specific guidelines and customer communications to support correct reporting.

DSP deferrals

We are maintaining communications with DSPs as they reach their deferral due dates. The majority are progressing well and communicating with us when more time is necessary. We are continuing to send correspondence if a DSP product is identified as not on track and if urgent action is required.

Communications to employers will advise them to continue to check in with their DSP. If the DSP deferral does expire, the employer would be required to request an employer level deferral.

Child support reporting

A question was raised regarding child support reporting and the extent of DSPs that have embraced the child support reporting.

ATO noted over 80% of DSPs have built the functionality. The majority have had child support reporting. The amounts being reported through STP are being correctly sent to child support.

Regardless of what channel an employer chooses to fulfill their child support obligation, from time-to-time child support may require contacting a client to discuss and confirm their reporting.

Employer transition, engagement and communications

Employer readiness and transition

ATO tabled a paper on employer transition engagement and communication noting:

• As of 12 August, over 212,000 employers are now reporting STP Phase 2 data for more than 3.4 million individuals.

The ATO will commence a communication blitz to address the common mistakes we are seeing through reporting STP Phase 2 reporting. We will also promote the new 8 short topic-based videos which have also been published with the support of industry partners.

All the communications and links will be shared over the coming weeks. Members are encouraged to share the messaging and products within their networks and members.

Employer direct correspondence

The next correspondence campaign is scheduled to commence from 18 August 2022.

We are sending tailored letters to raise awareness and ensure employers know their STP Phase 2 obligations. The letters will be based on product readiness and be sent to the following employer groups:

• First nudge/reminder to all employers whose product is ready and are not covered by a deferral, issuing from 18 August
• Get ready reminder issued to all employers whose product is ready and are still covered by a deferral, issuing from 25 August
• Call to action for employers whose product is not being updated to offer Phase 2 reporting, issuing from 25 August.

We are working though through the next Tax and BAS agent client lists. A small focus group will be established to ensure the clients list messaging is right. Any agents or members interested in joining this group should contact Chontelle Weyman.

Member’s discussion

Industry and intermediaries are seeking an update from Fair Work regarding the status of mapping awards and allowance codes.

Industry queried what ATO could do to improve notification of errors where partial finalisation status is received, that is where parts of the employer’ payroll data has been successful and has finalised, but certain parts have not. Intermediaries would like more granular error messaging to identify which employee’s data has failed the process ATO to consider what more can be done.

Consultative group update

ATO confirmed the STP Employer Transition Working Group has also raised the same common reporting issues as that discussed at today’s STP Phase 2 Advisory Group.

The next STP Employer Transition Working Group is scheduled for mid-September.

Tax Time update

The ATO has made a big shift where the STP data is the main source of income information. There have been extremely large levels of finalised data going into the income tax process.

As at 15 August 2022:

• 20.9 million income tax statements have been received and 1 million Payment Summary Annual Reports
• 850,000 un-finalised records are sitting in the system
• 96% of records have been finalised.

Types of errors we are seeing:

• incorrect year, where employers are updated their event and putting a date from the 1 July onwards on the transaction and finalising the wrong year
• an increase in authorisation errors.

We are continuing to see a decline in duplicate records each year. This year we have blocked 20,000 duplicate records.

Industry scan

Member insights on what’s new and different in their environments:

• A segment of employers has simplified their record keeping and reporting obligations prior to adopting STP Phase 2 and STP Phase 2 compliance requirements are making them do the right thing, however it is leading to employers feeling like their payroll systems have become a lot more complex.
• Concerns there are some DSPs using different language to promote their product readiness after whitelisting. Terms being used include approved, compliant, endorsed, accredited authorised by the ATO and Fair Work. It was suggested terms and guidance need to be reviewed and sent to the DSP to ensure they use the correct terminology when promoting their software.
• The prospect of the ATO revising the terms whitelisting and blacklisting to align with current changes undertaken by companies such as Google, Microsoft, SAP etc.
• There continues to be issues with people not familiar with processing payrolls.
• Medium to large employers are getting on with it. There is good flow of questions coming through particularly around allowances, all-purpose allowances and annualised salaries and how they need to be reported.
• Employers continue to struggle with work allowances and salary sacrifice issues.
• Concerns around issues with annualised allowances and annualised overtime and many do not seem to understand the impacts where this data is not reported separately.

It was suggested that Services Australia provide a business information sheet for employers which explains why they are doing this in STP and shows them what pay types give different impacts to different benefit entitlements and obligations.

ATO to provide industry feedback to Services Australia to consider.

A lot of employers use payrates within Fair work – It was suggested the language used on Fair Work payrates could be more STP compliant and provide an explanation of where STP category should go. This would help with each award. ATO will pass on the feedback and suggestions to the Fair work Commission.