Single Touch Payroll Phase 2: What every business owner needs to know
Single Touch Payroll (STP) is a government initiative that optimises employer reporting to the ATO. Employers must report salary or wages and pay-as-you-go withholding amounts each time they pay their employees. Under phase 1, superannuation contributions must also be reported at the time of payment.
This change to the payroll process has removed the need for end-of-year tax payment summaries. It provides employees with better access to information regarding their year-to-date tax position.
STP Phase 2 seeks to further increase reporting and efficiencies. The deadline for Phase 2 implementation is fast approaching, and with the current state of the economy, the ATO has offered a deferral.
Read on to find out all the latest information you need to know about STP Phase 2 reporting, including answers to FAQs.
What is Single Touch Payroll (STP) Phase 2?
STP Phase 2 builds on the initial single touch payroll (STP) reporting to include submitting additional information to the ATO every time you pay your employees. It is designed to ease the pressure on employers who need to submit information to multiple government agencies. For example, STP software automatically sends your employees' tax and superannuation information to the ATO. The extra information required to be reported includes:
- a breakdown of each employee’s gross income to include the type of income received (e.g. wage, paid leave, allowances, overtime, bonuses, commissions and salary sacrifice arrangements).
- the basis of an employee’s employment (e.g. full-time, part-time or casual).
- any child support garnishee or deductions
- the reason for an employee ceasing employment (removing the need for employment separation certificates).
The ATO will share this information with relevant government agencies, including Services Australia.
Single Touch Payroll Phase 2 Deferral
The Australian Taxation Office (ATO) has announced a deferral in the mandatory Single Touch Payroll (STP) Phase 2 reporting obligations for every Australian business that employs staff.
The deadline to implement the new ATO STP Phase 2 is now 1 March 2022 rather than the previously scheduled 1 January 2022 date. This is the second postponement of the STP Phase 2 deadline. It was originally scheduled to commence on 1 July 2021.
Why have the Single Touch Payroll Phase 2 reporting obligations been delayed?
The ongoing COVID-19 lockdowns in New South Wales and Victoria are the major reason for the postponement. Many businesses are struggling to survive in these extremely challenging times. The easing of the deadline reduces the immediate pressure for business owners in Australia to update their payroll software to cater for STP Phase 2 reporting.
Can you still start STP Phase 2 on January 1 2022?
Yes, if your business is ready to make the transition. It's actually encouraged to be STP compliant by this date.
What if you make mistakes in your STP Phase 2 reporting?
There will be no penalties for honest STP Phase 2 reporting mistakes made during the 2022 calendar year.
What are the key differences between Single Touch Payroll Phases 1 and 2?
STP Phase 1 is a government initiative that became compulsory for all employers with 20 or more employees from 1 July 2018. It became compulsory for all employing businesses from financial year 1 July 2019. The introduction of single touch payroll information meant employers could say goodbye to the payment summary.
STP Phase 1 reporting only included the following information:
- employee wages (without the breakdowns that will be required for STP Phase 2 reporting).
- pay as you go (PAYG) withholding tax amounts for each employee.
- superannuation payment amounts for each employee.
Submitting additional payroll information to the tax office means that employees can see up-to-date tax and super information in their online services account with the ATO.
Who are the major payroll software providers for single touch payroll (STP)?
Major STP enabled software providers include:
If your business isn't ready, you should contact your provider to see when you will be able to upgrade your software to include STP Phase 2 reporting functionality. It is already available with several online payroll software providers at an affordable cost.
What if I can’t meet the March 1 STP reporting deadline?
You should contact the ATO to apply for an extension. You will need a valid reason for not being able to meet the STP reporting deadline. There is no guarantee your application will be successful.
Is single touch payroll compulsory?
Single touch payroll reporting has been a mandatory obligation for all business owners with employees since 1 July 2019.
If your business is having cash flow issues, we may be able to offer support. At Earlypay, we offer a business line of credit secured by your accounts receivable. If you need extra cash to pay your employees or upgrade equipment or software, our invoice finance facility means you don't need to wait until your customers pay their invoices. If you'd like to learn more about invoice financing, equipment financing, or trade financing with Earlypay, please call our friendly team on 1300 760 205 or contact your broker or BDM.