Single Touch Payroll

Single Touch Payroll (STP) is a regime that was introduced 1 July 2018 for employers with

20 or more employees and 1 July (What year) for employers with 19 or fewer employees.

Through STP employers report payroll information to the ATO at each pay event. The information currently includes;

  • Salaries and wages
  • Pay as you go (PAYG) withholding
  • Superannuation

STP to collect additional data

It was announced in the 2019-20 Budget that the ATO would be expanding the collection of data through STP. This expansion is known as STP Phase 2, there are no additional steps for employers to take at this stage.

STP Phase 2 Explained

The ATO has detailed the key changes being introduced under the Single Touch Payroll (STP) Phase 2 regime, including categories of payments employers will need to report. STP phase 2 is mandatory reporting that will commence from 1 January 2022, with the aim to reduce the reporting burden on employers who are currently required to provide employee information to multiple government agencies.

There will be additional information required to be reported with each pay event, in addition to the basic salary and

wages information reporting through the original STP regime that first began in 2018. The STP reports will soon need to separately itemise the components that make up the gross amount, including bonuses and commissions, director’s fees, paid leave, salary sacrifice, overtime, allowances and gross (other).

Employers will need to report whether an employee is full-time, part-time or casual, the tax for PAYG purposes, and the reason for separation when employees leave.

Income types and country codes will need to be included to make it easier for employees to complete their tax returns.

Salary-sacrifice amounts will need to be included, while lump-sum payments will need to be broken down into two different categories.

The ATO is currently working with software providers to update their STP-enabled software and transition arrangements will be introduced in the lead up to 1 January 2022 deadline.

Key updates

The key features of STP Phase 2 include;

  • Reducing duplication of information employers provide to Government departments including;
    • Incorporating the reason for an employee ceasing employment to reduce the need for separation certificates
    • Reporting child support garnishee and deduction amounts voluntarily through STP instead of through the separate manual remittance process
  • Removing the need to send tax file number and withholding declaration information to the ATO
  • Better defining the components that make up gross income that will
    • Make it easier for employers to understand their obligations
    • Help employees understand their earnings and help them with their interactions with Services Australia
    • Ensure consistency of reporting across the various income types.
  • Reporting employee payments by income type (or income streams) including
    • Salary and wages
    • Foreign employment income
    • Closely held payees
    • Working holiday makers.

What is not changing

While the information being reported is changing, there are a few things that are not changing;

  • The way employers lodge their STP report
  • STP reports are still due on or before pay events unless you are eligible for a reporting concession
  • The types of payments that are in-scope for STP reporting
  • Taxation and superannuation obligations
  • End of year finalisation requirements.