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Jan 24, 2023
From 1 July 2019, STP became mandatory for all businesses that withheld PAYG contributions for employees or contractors and Single Touch Payroll Phase 2 (STP2) is a continuation of this and remains compulsory.
Unless you have an exemption or deferral, you will need to start transitioning to STP if you have yet to do so. The mandatory start date for Singly Touch Payroll Phase 2 (STP2) reporting is 1 January – however, the date is flexible not to add further burden to employers. Check what the date with your payroll software is. Xero, for example, has an exemption until 31 March 2023.
In STP, if your employee earns $20,000 in wages and $1000 in overtime, you report this as $21,000 gross.
In STP2, you report the employee’s earnings as $20,000 in wages and $1000 as overtime. You can see detailed examples on the ATO website.
What is still included in gross payments:
If you have employees with annualised salaries, the requirement is to split the annualised salary into each of its components. This may include
To give more flexibility in the ways in which you pay employees, in STP2, employers must:
Tax file number declaration
Employers are currently required to submit a TFN declaration to the ATO. STP2 will incorporate the employee’s tax details via STP reporting instead of submitting separate documents to the ATO.
It will be mandatory to specify a reason for an employee’s termination in STP2.
The introduction of the termination reason will mean that employers will no longer have to provide a separation certificate in most cases.
As part of the changes in reporting income, paid leave will no longer be included as part of the gross earnings when reporting via STP.
Most paid leave will be allocated under Leave type “O” in STP2.
Previously, some allowances have been able to be reported as gross income. In STP2, all allowances will have to be reported separately in most income types.
Although these changes sound like more work for the employer, most businesses will already be transitioning to STP2. Software such as Xero and MYOB have already integrated the changes to help make the transition as smooth as possible.
There are quite a few changes in single touch payroll phase 2 that we, as a business, are also trying to wrap our heads around. If you need further assistance, please talk to your bookkeeper or accountant.
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