What is Single Touch Payroll Phase 2?

In the 2019–20 Budget, the Government announced that Single Touch Payroll (STP) would be expanded to include additional information.

The expansion of STP, also known as STP Phase 2, significantly increases the data required to be reported to the ATO. It is hoped that this additional reporting will assist in ensuring employees are paid correctly as well as reducing the need for employers to report information about employees to multiple government agencies. 

It will also help Services Australia’s customers, who may be your employees, get the right payment at the right time.

The official start date for Phase 2 reporting was 1 January 2022, however the ATO has advised that employers who provide the additional reporting required under Phase 2 by 1 March 2022 will be accepted as having met the deadline. 

Digital service providers (DSP’s) may apply for a deferral if they need more time to make changes and update their solutions. 

Xero and its customers have been granted a deferral until 31 December 2022. This means that all customers using Xero payroll will also have until that date to report their first STP Phase 2 pay run. 

If more time to transition is required, you may apply for a deferral beyond your software provider’s deferral. Registered agents will also be able to apply for a deferral.

What is Changing?

STP Phase 2 expands the data being collected each pay period. Most significantly, there is now a requirement to separate the components of gross earnings to assist employees with their tax return deductions. 

This will also assist Services Australia in identifying different types of income for the purposes of administering their programs. One example being child support deductions.

Gross earning components (disaggregation of gross) that will now need to be itemised separately include:

• Allowances (specific categories)
• Paid leave (specific categories)
• Overtime
• Bonuses and commissions
• Directors’ fees
• Lump sum payments and employee termination payments (classified by type)
• Salary sacrifice and deduction amounts (specific categories)

Other data captured in STP Phase 2 includes:

• Employee’s basis of employment (full-time, part-time, casual etc.)
• Tax treatment of employee (TFN declaration details, tax variations)
• Reason for employee termination (voluntary cessation, redundancy, dismissal etc.)
• Income type and country codes (working holiday makers, labour hire)

What isn't changing

• the way you lodge your STP
• the due date
• the types of payments that are needed
• tax and superannuation obligations
• end of year finalisation requirements.

If your business requires assistance with any of the above and/or you would like an obligation free quote for any of these services, payroll or general bookkeeping services, please do not hesitate to contact us on 07 5413 9393 or enquiry@evolveonlinebookkeeping.com.au