Single-touch payroll, STP Phase-2 is an Australian government initiative to make it easier for employers to report to government agencies. It is the way the employer reports their employees’ tax and super information to the ATO.
What is STP Phase-2?
STP Phase-2 is a move towards more appropriate digital records and reporting. In the 2019–20 Budget, the government of Australia announced that Single Touch Payroll (STP) will expand to include some additional information. It also helps Services Australia’s customers, who may be employees, to get the right payment at the right time. Businesses must consider that if they are an employer, they need to keep up with their payroll software solution provider to switch over to STP Phase-2.
What stays the same in filing STP Phase-2 as STP Phase-1?
STP Phase-2 underwent some changes for making necessary improvements while many things stayed the same. Such as:
- The way you lodge your STP report is the same for both phases.
- The STP report will remain due unless one gets the approval from the ATO for filing it.
- One must report only those payments that have a scope in STP.
- Taxation and superannuation obligations remain the same.
- One must finalize the reports by the end of the year.
- Penalties for STP Phase-2 remain the same as in Phase-1.
Why must you report accurate STP?
Accurate Single Touch Payroll Reporting is not just important for record keeping but has various other benefits.
- The employees will get the right information as displayed in their income statement.
- Employees’ can pre-fill their individual income tax returns the right information to the ATO.
- Other government agencies have the correct information when interacting with you or your employees.
- If the STP reporting is incomplete or inaccurate, the employees’ income can get incorrect treatment for tax, super or social security purposes.
Employment and Taxation Information
STP reporting includes employment and taxation information that becomes important for acknowledging the payment made as tax. It also enables some of the interactions that the employee and the employer have with government agencies for the purpose of STP reporting.
A common mistake while reporting employment and taxation information is omitting the cessation date and reason for an employee when there are payments connected to termination, such as Employment termination payments (ETPs), Unused leave on termination (paid leave type U), Lump Sum A, B or D. Even if the company rehires the terminated employee in the future, one must include the cessation date and reason. However, the employer must remove the cessation date and reason from STP report for the next time in case they rehire the employee.
Reporting the Income Types and Country Codes
STP Phase-2 allows an employer to bifurcate the purpose of amount paid to an employee. In addition to this, the form must also include a country code.
A common mistake while reporting the income types and country codes is not reporting the country code; i.e. ‘na’ correctly. While reporting the STP, ‘na’ stands for the country code that is Namibia. However, some applicants might consider it as “Not Applicable” mistakenly. Instead of that, one must use a country code that is easy for the applicants to understand.
Required Information and Reporting Essentials
It’s common to make errors while reporting financial information when it comes to expenses and allowances. Therefore, to make it easier for you to bifurcate your finances in appropriate spaces follow the below instructions:
- Information regarding the April bonus, Commission, and Productivity must be reported under Bonuses and Commission.
- Saturday working hours or penalties do not come under the allowances. If they are an employee’s ordinary pay, it must be reported under Gross. Whereas, if it is extra hours given by employees, then it must come under the Overtime slab.
- Expenses made on Tools and Equipment must be reported under Tool allowance.
- Laptops and mobile phones used for work also come under different slabs based on their purpose and usage. If the employees are using their own laptops and mobile phones in the office, payment made to them should come under Tool Allowance. If they are using them for work from home, it must come under other allowance.
- For maintaining a Qualification, Licence, or Certificate, payment made to employees is considered a Qualification and Certification Allowance. However, if employees are paid as recognition of their qualifications, it is considered as Task Allowance.
- Payments made for duties performed on the basis of site, cleaning, height, forklift, supervisor, higher duties, or remote work, the amount come under the Task Allowance.
- Employer must report the purpose for the amounts paid for overtime meal and meal. If employees are working overtime, the amount comes under Overtime meal allowance and if they are getting paid for meal during shift timing, it comes under other allowance.
Basically, an employer must report the purpose and circumstances under which they made payments to the employees. To know more about the Single Touch Payroll, and its penalty or deadline, go through Single Touch Payroll: Mandatory Compliances for Australian Employers.
Written by – Aniket Tyagi
Follow us for more good reads and helpful insights if you have queries related to finance management and tax filing!