Insights – STP Phase 2 starting 1 January 2022
STP Phase 2 is due to start from 1 January.
The extension of STP is focused on streamlining reporting obligations with other government agencies which have previously been reported manually.
While Xero has advised that it has received a deferral to action Phase 2 until 31 December 2022 (which means Xero users get the extension as well), other software such as MYOB or Quickbooks will be ready to use by the starting date of 1 January. If you are in doubt you should check with your software provider.
What will change?
The extra information that will be reported from 1 July will include:
- Termination Reason – it will now be mandatory to report the reason for terminating an employee to the ATO via STP. This will take away the need for an employment separation certificate to be issued to the employee altogether.
- Child support garnishee/deduction amount – Employers will be able to report child support deductions/garnishees via pay events, which will remove the need to report separately on a monthly basis. This will initially be voluntary reporting however if they choose not to report via STP, they will need to continue the existing process of reporting monthly.
- Disaggregation of gross payments– Your STP report will now itemise the components that make up the total payment including showing separate amounts for bonuses and commissions, directors fees. Salary sacrifice and overtime; rather than just showing gross payments.
- Paid leave – Paid leave will no longer be incorporated as part of gross earnings when reporting earnings via STP. Instead it will be reported using separate itemised leave type codes.
- Allowance items – Additional allowance type codes will be added to meet the new reporting requirements. This will allow the ATO to assist employees when completing their individual income tax returns.
- Tax file number declaration – Employee tax information will be incorporated via STP reporting, eliminating the need to submit tax file declarations to the ATO as a separate process.
- Lump sum E letters – This information will be included in the pay event prior to finalisation of the employee’s Income Statement and so employers will not need to provide the lump sum E letter to employees each financial year.
- Negative Year-to-Date (YTD) reporting – The ATO will allow negative YTD amounts to be submitted via STP.
- Transitioning employees from another payroll system – Businesses transitioning from one payroll system to another will be able to enter the previous BMS ID/payee IDs in the new system. The ATO will link the information so that there is only one income statement reported for each employee. This replaces the need to manually adjust employee YTD earnings after transitioning payroll systems.
What stays the same?
- The timing and process that you use to lodge your STP today
- Taxation and superannuation obligations
- End of year finalisation requirements.
What do I need to do?
Right now, your payroll process wont change, however before Phase 2 starts your software may prompt you to fix anything that is required to meet the new standards. There will be new fields added to meet the requirements above. This will be similar to when you first setup STP.
If you like to be organised in advance, you can start updating these details now.
How Can Alto Help?
If you need help understanding your STP requirements we can assist or connect you with a bookkeeper to provide the appropriate support.
Author: Donna Bruce