What you need to know about STP Phase 2

What is the Single Touch Payroll Expansion?

First and foremost, STP stands for Single Touch Payroll (and yes, financial people just love abbreviations). It is practically an online system through which the businesses send payroll data (that is: tax and superannuation information) to the ATO each time when processing a pay run.

What’s more acute at the moment is the 2nd Phase of STP (also known as STP 2; STP Phase 2, STP Extension) that will come into effect from 1 January 2022.
Quite close, isn’t it?
Well, not entirely, to be honest. Since STP 2 requires the software providers to update their reporting software, they could obtain a deferral from the ATO; hence their customers will be automatically covered by that deferral. To put it more simply, if you’re using Xero or MYOB, you can lean back until 31 December 2022, and there’s nothing you need to do just yet.
Excellent… but wait a minute, if you don’t have to begin – provided you’re using one of the software that obtained a deferral -, why should you bother reading further?

Obviously, you’re a responsible business owner who is keen to prepare ahead for their compliance obligations. You’re a legend indeed!

What isn’t changing?

Let’s start with those that will not change under STP 2:

• the way STP should be lodged: practically electronically via an STP-enabled software or if you don’t use one – by the way I’m really curious the reasons why a business that has employees doesn’t use payroll software these days, so if you’re one of them, please shoot me a message – your BAS agent or tax agent can lodge it on your behalf;
• the due date an STP should be lodged;
• the payments that were included in Phase 1 are still to be included;
• tax and super obligations: STP is a reporting method, it won’t effectively affect the obligation itself;
• the end of year finalisation should still be prepared and lodged.

So, as you can see, the framework of STP remains unchanged.

What is changing then?

In STP 2, ATO extends the required dataset to capture the information needed by other government agencies (e.g. Services Australia). Therefore, STP Phase 2 will ultimately reduce – in a way – the administrative burdens of the businesses.
Let’s list the information you need to include in your reporting:

• disaggregation of the gross amount paid: one of the most key changes is that you need to include the details of the remuneration paid (income, allowances, overtime, paid leave, bonuses, salary sacrifice etc.);
• TFN (Tax File Number) declaration should not be sent separately to the ATO but the data should be included in the STP reporting;
• the employment basis (full time, part-time, casual, labour hire etc.) will be mandatory to report;
• termination date and reason will also be included; therefore, you will not need to provide separation certificate any more when an employee leaves.

There are evidently more requirements in STP Phase 2, but I wanted to shine a light on the major ones that affect most businesses. If you want to know all the details, I’d advise you to keep an eye on the ATO portal.

What to do next?

Firstly, find out whether your payroll or accounting software provider obtained a deferral. That will give you some room to schedule your preparation.
Secondly, you need to assess whether your current payroll system is detailed enough and you need to prepare for recording the required details. You need to review the pay, the leave, and the deduction classification you have in place and if necessary, you need to adjust them to ensure correct reporting. Depending on how detailed your current payroll records are, the review and assessment can be a rather complex task, unfortunately.
Thirdly, you need to wait for your software provider’s communication and when the software is updated, you can update the employee and payroll records in order to start STP Phase 2 reporting.

So, to sum up: you need to evaluate whether your business is ready for STP 2. Should there be any gaps, start planning and revising your payroll system.

I’d love to hear from you,

Krisztina
Organised BAS

PS:
If there’s any topic you find worth discussing, or you have a question, please don’t hesitate to contact me on any of my channels or drop me a line on the form below. I’ll shortly come back to you with my reply.
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