Accurate STP reporting has always been important to ensure:
- your employees have the right information displayed in their income statement
- we can pre-fill your employees' individual income tax returns with the right information
- other government agencies have the right information when interacting with you or your employees.
Your employees' income could be treated incorrectly for tax, super or social security purposes if your STP reporting is incomplete or inaccurate.
When you're setting up for STP Phase 2 reporting, you'll usually need to re-map your pay codes or categories. How to do this will depend on the product you use.
Some common mistakes when setting up your pay codes or categories include:
- incorrectly selecting 'not reportable' or 'do not report to the ATO'
- not maintaining continuity of year-to-date amounts from your STP Phase 1 reporting.
Video: STP – Reporting help – pay code or item set up
Media: STP - Reporting Help - Pay Code/Item Set Up
https://tv.ato.gov.au/ato-tv/media?v=bi9or7odtwqbx1External Link (Duration: 08:37)
When you're assigning STP Phase 2 reporting categories to each of your pay codes or categories, many products will have an option such as 'not reportable' or 'do not report to the ATO'. Different products may have different names for this.
Many employers select this option incorrectly.
Generally, all amounts paid to employees should be reported to us. However, there are some exceptions.
You should only choose 'not reportable' or 'don’t report to the ATO' for amounts that are covered by those exceptions, such as:
- travel allowance below the ATO’s reasonable amounts
- overtime meal allowance below the ATO’s reasonable amount
- post tax deductions except for those you need to separately identify.
If you choose 'not reportable' or 'do not report to the ATO', you're choosing not to include these amounts in your STP report. This means:
- we won't display this information on your employee’s income statement
- these amounts will not be shared with Services Australia.
This means you won't have met your reporting obligations and it can impact your employees' tax, super or social security outcomes.
When you transition to STP Phase 2 part-way through the financial year, you need to identify whether you need to maintain continuity of year-to-date (YTD) amounts you have already reported.
In most cases, you do need to maintain continuity of your YTD amounts unless you are using the replacing payroll IDs method for transitioning to STP Phase 2.
Different solutions will manage this in different ways:
- some solutions will transition your YTD amounts for you
- some solutions may require you to manually copy or input the existing YTD amounts.
If your solution requires you to manually copy or input your existing YTD amounts to maintain continuity, a common mistake is not bringing over all the YTD amounts that you need to.
Make sure you remember to copy or input all your YTD amounts into their appropriate STP Phase 2 reporting categories. Comparing your first STP Phase 2 reports with your last STP Phase 1 reported amounts can help you make sure that you have remembered everything.
You may need to speak with your digital service provider if you need help.
Video: STP – Reporting help – continuity of YTD amounts
Media: STP - Reporting Help - Continuity of YTD amounts
https://tv.ato.gov.au/ato-tv/media?v=bi9or7odt4n98pExternal Link (Duration: 05:34)
Maia is an employer transitioning from STP Phase 1 to STP Phase 2. She uses a solution which requires her to manually input all her existing YTD amounts to maintain continuity when setting up for STP Phase 2.
Maia inputs all the income amounts for her employees and starts lodging her STP Phase 2 reporting. However, when we received her STP reporting we noticed that there were no pay as you go (PAYG) withholding amounts for any of her employees.
It looked like Maia was failing to withhold from her employees' salary and wages, so we contacted her. Maia realised that she had forgotten to input the YTD amounts for PAYG withholding when she was setting up for STP Phase 2.End of example
Your STP reporting includes employment and taxation information that:
- is important for providing context to the payments you make
- enables some of the interactions you and your employees have with government agencies to be streamlined.
A common mistake when reporting employment and taxation information in STP Phase 2 is omitting cessation date and reason.
When an employee leaves, you must include their cessation date and reason in your STP Phase 2 reporting. Omitting these is a common mistake.
In general, your STP Phase 2 reporting should contain a cessation date and reason for an employee when there are also payments that are connected to termination, such as:
- Employment termination payments (ETPs)
- Unused leave on termination (paid leave type U)
- Lump Sum A, B or D.
Include the cessation date and reason even if you may rehire the employee in the future. If you do rehire the employee, you can remove the cessation date and reason from your STP report the next time you pay them.
We will share your employees' cessation dates and reasons included in your STP report with Services Australia. Having this information already available reduces Services Australia's need to:
- contact you for this information
- require you to complete an employment separation certificate.
Video: STP – Reporting help – cessation date and type
Media: STP - Reporting Help - Cessation Date & Type
https://tv.ato.gov.au/ato-tv/media?v=bi9or7odtwq5krExternal Link (Duration: 05:05)
A common mistake when reporting income types and country codes in STP Phase 2 is incorrectly reporting the 'na' country code.
Some employers reporting country codes in STP Phase 2 are using the code 'na' to mean 'not applicable'. Where you are required to report a country code, you cannot report 'not applicable' and you must report the country code relevant for that employee.
'na' is the country code for Namibia. If you report 'na', this will tell us that your employee is either working:
- overseas in Namibia
- in Australia and they are from Namibia.
If the employee does not have a connection to Namibia, reporting that they do can make it more difficult for them to manage their tax obligations.
Video: STP – Reporting help – country codes
Media: STP - Reporting Help - Country Codes
https://tv.ato.gov.au/ato-tv/media?v=bi9or7odtwq58pExternal Link (Duration: 04:08)
STP Phase 2 has introduced the disaggregation of gross. As part of disaggregation of gross, all allowances need to be separately reported. There are new allowance categories and it’s important that you review the allowances you pay to understand where they should be reported in STP Phase 2. We have a short video discussing the principles of reporting allowances in STP Phase 2.
Some common mistakes when reporting allowances in STP Phase 2 include:
- incorrectly reporting amounts using the Other allowances category
- not separately reporting all-purpose allowances.
Video: STP – Reporting help – allowance principles
Media: STP - Reporting Help - Allowance Principles
https://tv.ato.gov.au/ato-tv/media?v=bi9or7odtwqbcuExternal Link (Duration: 03:49)
In STP Phase 2, there are 8 specific allowance categories and a category called 'Other allowances (allowance type OD)'. A common mistake in STP Phase 2 reporting is using Other allowances (allowance type OD) to report things which do not belong in that category.
You must report allowances in their appropriate category because each category is treated differently for tax, super and social security purposes. Only report an amount as Other allowances (allowance type OD) if it's an allowance that does not belong in one of the 8 specific allowance categories.
The following table shows some examples of amounts reported by employers as Other allowances (allowance type OD) which should be reported differently.
Video: STP – Reporting help – other allowances
Media: STP - Reporting Help - Allowances - Other
https://tv.ato.gov.au/ato-tv/media?v=bi9or7odt4dyf9External Link (Duration: 05:59)
Examples of amounts reported in Other allowances
Where should these be reported?
These are not allowances. They should be reported as Bonuses and Commissions.
These are not allowances.
If the payment is connected to the employee’s ordinary hours, this should be reported as Gross.
If the payment is connected to the employee's work outside their ordinary hours, this is should be reported as Overtime.
These allowances belong in one of the specific allowance categories, and should be reported as Tool allowance (allowance type TD).
These allowances may belong in one of the specific allowance categories depending on the purpose of the allowance.
If the employee is required to supply their own laptop or mobile phone for work, report as Tool allowance (allowance type TD).
If the employee is using their own laptop because they’re working from home, report as Other allowance (allowance type OD) with the allowance code H1.
These allowances belong in one of the specific allowance categories, depending on the purpose of the allowance.
If the employee is being paid this allowance to cover the expenses they incur in maintaining a qualification, report this as Qualification and certification allowance (allowance type QN).
If the employee is being paid this allowance in recognition of their higher level of skill, report this as Task allowance (allowance type KN).
These allowances belong in one of the specific allowance categories, and should be reported as Task allowance (allowance type KN).
These allowances may belong in one of the specific allowance categories depending on the purpose of the allowance.
If the allowance is being paid in connection to the employee working overtime this should be reported as overtime meal allowance (allowance type MD).
If the allowance is being paid in connection to the employee working ordinary time (such as a shift meal allowance), it should be reported as Other allowance (allowance type OD) with the allowance code ND.
These allowances may belong in one of the specific allowance categories depending on the purpose of the allowance and could be reported either as:
Many awards include allowances that are added to an employee's hourly rate and are paid 'for all purposes'.
In STP Phase 2, you must separately report all-purpose allowances against the relevant allowance type. It's important that these allowances can be identified because they're treated differently in different situations, and not being able to identify them may disadvantage your employee.
There are more details about reporting all-purpose allowances in our STP Phase 2 Employer Reporting Guidelines.
Video: STP – Reporting help – allowances – all purpose
Media: STP - Reporting Help - Allowances - All Purpose
https://tv.ato.gov.au/ato-tv/media?v=bi9or7odt4dyhoExternal Link (Duration: 05:40)
There are components you need to report through STP that influence the amount you pay to an employee but relate to the employee themselves rather than the kind of payment they are receiving.
A common mistake when reporting these other components in STP Phase 2 is treating reportable employer super contributions and salary sacrifice as the same thing.
When reporting amounts salary sacrificed to super through STP Phase 2, you report the amount of salary and wages your employee sacrificed as salary sacrifice super (salary sacrifice type S).
These amounts are often also considered reportable employer super contributions (RESC). However, it's important to remember that salary sacrifice super and RESC are different things and used for different purposes.
If an amount is both salary sacrifice type S and RESC, you need to report it as both in STP. It's important to understand the relationship between reporting RESC and salary sacrifice type S to ensure you can report accurately.
Video: STP – Reporting help – RESC and salary sacrifice
Media: STP - Reporting Help - RESC & Salary Sac
https://tv.ato.gov.au/ato-tv/media?v=bi9or7odtwq5mzExternal Link (Duration: 04:19)