Single Touch Payroll Phase 2 Advisory Group key messages 27 February 2023

Key topics discussed at the Single Touch Payroll Phase 2 Advisory Group meeting 27 February 2023.

On this page

• Welcome and Introductions
• Digital service provider readiness and assurance
• Employer transition, engagement and communications
• Separation certificates
• Low or no cost register of STP products for employers
• Industry scan

Welcome and Introductions

The chair opened the meeting and welcomed members and guests. Acknowledgement of Country was delivered.

No conflict of interest declared.

The key messages from the 13 December 2022 were endorsed.

A member noted the recent media attention around meeting confidentiality and expressed the need to re-confirm of the confidentially approach for the Single Touch Payroll Advisory Group (STPAG).

The Chair confirmed members are not authorised to disclose information that is discussed or provided at an STPAG meeting which is declared confidential. Meeting papers provided to members are for members only.

Draft key messages from meetings are distributed to members for comment. The final key messages are published on ato.gov.au for members to share across their associations or organisations.

Digital service provider readiness and assurance

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

• Digital service provider (DSP) product readiness is progressing well with 263 whitelisted products (81% of 323 expected to build Single Touch Payroll [STP] Phase 2 and 40 products currently in extended conformance testing.)
• Not inclusive of recently whitelisted products, 85% of employers with a whitelisted product and an expired deferral have now transitioned.
• Our focus continues to support the remaining DSPs with their product readiness, including extended conformance testing, initial data production testing and managing the DSP deferrals.
• With over 80% of products now whitelisted, extensions are continuing to be granted in extenuating circumstances only.
• Currently there are 35 DSP products that are not currently ready and are not covered by a deferral. There are around 330 employers linked to these products.

Employer transition, engagement and communications

There are 482,000 employers reporting in Phase 2 data for over 8.9 million employees.

As more products are whitelisted and deferrals expire, we are seeing a substantial number of employees onboarding daily. We are tracking towards 95% of employers having transitioned by the end of July 2023.

As we progress towards July 2023, the ATO’s focus is centred on the remaining employers who are yet to transition.

Additional guidance is planned to help and educate employers and their agents to understand their ongoing obligations. Topics will cover the correct classification of employment, tax file number declarations requirements, key dates in an employer's STP reporting, pay date, late and missed reports, including reminders around the accurate reporting and the Corrections Framework.

Member feedback from the STP Employer Transition Working Group and STPAG around firmer messaging has been incorporated into the 2 nudge letters issued in February.

We are now developing the penalty approach and strategy for those employers who do not transition to STP despite being reminded.

Industry insight and comments:

• What is the ATO compliance approach for misclassifications of payments. For example, allowances in the wrong spot or wages not coming through?

The ATO confirmed the Corrections Framework should still be utilised to correct reporting mistakes.

• Closely held payees’ verses salary and wages remains an issue as accountants and tax agents use the closely held payees by the definition in the income tax.

Consultative group:

• The STP Employer Transition Working Group will be winding up.
• A big thank you to the STPAG and STP Employer Transition Working Group for all the feedback and work in helping shape the ATO correspondence.
• The next client lists are being worked through and will start to issue to tax and BAS agents around April or May. The list outlines all employer clients and their STP reporting status.

Industry insight and comments:

• Concerns around the closure of the group, as the STPAG has given employers a platform for interacting with the ATO.
• Members expressed the need for a specific employer group where the employer, employment and STP issues can be discussed post the closure of the STP Phase 2 project.
• Members were encouraged to collectively provide a business case for the chairs to consider.

Expanding STP data use to address SG non- compliance

Members were reminded that the PowerPoint presentation provided to members is not for further distribution.

The ATO tabled a paper on expanding the use of STP data to address Superannuation Guarantee (SG) non-compliance noting:

• We are enhancing the matching of data received from employers and super funds for SG from 1 July 2018.
• We use this data today, however this work will enhance it and store the dataset differently, so that it can support future improvements and address pain points.
• The improvements have been designed to allow the ATO to follow up on employer non-compliance more proactively.
• We will be able to tailor engagements and communications based on employer behaviours to support employers who are getting off track and maintain a low tolerance for employers not doing the right thing.
• Trends of incorrect reporting and opportunities to improve quality of reporting from either funds or employers will be identified.
• Accurate, complete, and timely data will provide confidence to the ATO to administer super guarantee compliance activities and prevent unnecessary contact.
• Existing compliance program activities will continue, and you can expect to see new treatments as this data matching program matures.

Separation certificates

The ATO will circulate an update on separation certificates out of session.

Low or no cost register of STP products for employers

The ATO tabled a paper on no-cost and low-cost solutions’ register noting:

• There is a variety of cost models for products on the register, including cost per employee and annual fees that are within the register requirements.
• Currently there are 22 products listed on register. It is not possible to identify exactly how many employees are supported by these products of the register.
• We have found the register is heavily used with over 2,000 hits per month.
• The register is still used as a reference for product selection and is still designed to support the purpose of linking a micro employer to a STP product that meets the 3 specific areas
  • to be affordable, costing less than $10 per month
  • take only minutes to complete each pay period
  • not require the employer to maintain the software.
   
• There have been some challenges to ensure the details are still current as we are relying on DSPs to notify DPO of any updated changes.
• We surveyed DSP on the register in 2022 to talk about Phase 2 continuation and to clarify Phase 2 reporting requirements were necessary and to ensure the products were continuing in Phase 2.
• We are proposing sending an additional survey to DSPs currently on the register, including DSP Australia and New Zealand. This would provide an opportunity for feedback and/or suggestions on each of the current requirements, including the pricing point.

Group insights and feedback included:

• It is not sustainable to expect a software company provider or an employer to produce a product that takes take minutes to complete each pay period, including maintaining software in this current environment.
• Employers are not going to think to go the ATO to search for these types of products.
• Concern the low-lost products dumb down the importance of STP Phase 2.
• The cost of cloud-based applications has broadly risen 35%, but we are still at $10.
• There needs to be more conversation around what a fair price point for payroll software in Australia.
• Let DSPs set a price, considering the complexities of STP Phase 2.

Industry scan

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

• Need guidance from Services Australia around what reporting elements in STP 2 impact different government benefits that they administer. Larissa to follow up Services Australia.
• Industry is seeing more and more members getting requests for separation certificates. ATO will follow up out of session.