XERO AND SINGLE TOUCH PAYROLL – PHASE 2
By now your software provider will have been working on getting ready for STP Phase 2.
We can confirm that XERO have secured a deferral with the ATO until 31 December 2022 for all of the customers using their software. And this may be the case with other providers while the get the software STP ready.
Where phase one was a way of reporting employees’ tax and super to the ATO, STP Phase 2 expands the program to capture more detailed information. This will reduce the compliance burden for employers and individuals, and help the admin side of things for Services Australia.
Although you need to provide the ATO with more information, the way you submit STP reports won’t change;
BENEFITS OF STP PHASE 2:
STP Phase 2 has many benefits for employers and employees including:
- Automating Tax File Number declarations to the ATO
- Employers no longer required to provide Lump Sum E Letters to employees
- Streamline requests between the ATO and Services Australia making it easier for employers/employees to interact with agencies like Centrelink and Medicare.
INFORMATION WHICH WILL BE INCLUDED IN STP PHASE 2:
STP Phase 2 expands the data being collected each pay period. Most significantly there is now a requirement to separate the components of gross earnings to assist employees with their tax return deductions. This will also assist Services Australia in identifying the different types of income for administering their programs.
The additional data will provide information to allow the ATO to validate PAYG Withholding amounts and estimate superannuation guarantee amounts to assist in ensuring employers meet their obligations.
Gross earnings components that will now need to be itemised separately include:
- Allowances (sorted into specific categories)
- Paid leave (classified by specific leave types)
- Overtime
- Bonuses and commissions
- Directors’ fees
- Lump sum payments and employee termination payments (classified by type)
- Salary sacrifice and deduction amounts (sorted into specific categories).
Certain allowances reported separately under STP Phase 1 will be reported in greater detail under Phase 2 and give more insight into payments being made to employee.
Other data captured in STP Phase 2 includes:
- Employee’s basis of employment (full time, part time, casual, labour hire, non-employee)
- Tax treatment of employee (applicable tax scale, options within tax scale, STSL status, Medicare Levy options, tax variation)
- Reason for an employee’s termination (voluntary cessation, redundancy, dismissal, contract cessation, transfer, ill health or death)
- Income type and country codes (closely held payees, inbound assignees, working holiday makers, Australian residents working overseas, labour hire).
WHATS NOT CHANGING:
While you need to start reporting more information the the ATO, some things will stay the same, such as:
- the way you file your pay run to the ATO
- the due date of your report
- the types of payments that are to be reported
- tax and superannuation obligations
- end of year finalisation requirements.
XERO will keep you informed of any updates to their software as it occurs and have lots of information on their website about it: