Get ready for Single Touch Payroll Phase 2
STP Phase 2 is just around the corner. Mandatory from 1 Jan 2022, STP Phase 2 aims to streamline reporting and compliance for businesses.
But if the new reporting requirements have got you worried, don't stress. You've chosen a fully STP-compliant ERP software built on a globally trusted platform: you're already prepared for STP Phase 2.
There are no changes to the way you lodge events, due dates for lodging events, types of payments required, tax and super obligations, or end-of-year finalisation requirements. Additional reporting requirements in Phase 2 are mostly based around employee and earnings data and are explained below.
Disaggregation of gross
While STP Phase 1 was all about digitising the annual payment reporting process and required employers to report an aggregated total of YTD gross income amounts, in Phase 2, components of gross earnings will need to be itemised separately. This is to streamline the different income assessments required by government agencies. Here's a helpful video that explains this.
What should you do to prepare?
Refer to STP Phase 2 requirements.
1. Review your pay categories: We've updated your pay category settings to reflect the new payment classifications. If you've created your own pay categories, assess whether they need to be re-classified. Refer to the link above.
Note: Updating payment classifications prior to Phase 2 commencing will not affect Phase 1 reporting requirements in any way.
2. Review leave categories: Ensure you're correctly reporting any paid leave taken by an employee by reviewing the payment setup for your leave categories. Refer to the link above to learn more about reviewing leave category payment setup.
3. Specify salary sacrifice categories: Phase 2 reporting requires salary sacrifice amounts be classified into either Superannuation or Other employee benefits. Wiise Payroll will automatically classify any existing deduction categories mapped to the deduction type 'Reportable employer super contribution (RESC)' as Salary sacrifice (Superannuation). Learn more about salary sacrifice deduction categories from the link above.
Employment and taxation conditions
In addition to reporting employees' commencement and termination dates, Phase 2 makes reporting the following mandatory:
- Employment basis
- Tax treatment
- Reason for termination
With more information captured in your STP report for the ATO, you'll no longer need to send TFN declarations to the ATO (you'll still need to complete the declaration) or provide employment termination certificates to terminated employees.
What should you do to prepare?
1. Review recently terminated employees: Wiise Payroll will now let you record the reason for termination for employees terminated after the 19 October 2021. If the reason isn't recorded, you won't be able to lodge the STP event with the ATO until you do. Learn more about this from STP: Preparing for the new Phase 2 reporting requirements.
2. Review employees' tax status: The new settings under Tax File Declaration in Wiise Payroll are designed to help you report the tax status of each employee correctly. Head to STP: Tax treatment & Phase 2 reporting to learn more about the tax treatments that may be applicable for your employees.
3. Audit invalid tax file numbers: Run an Employee Details Report and check the Tax File Number column for the TFN '987654321'. STP Phase 2 no longer supports this TFN, and employees with this TFN will be taxed at the highest rate. Learn more about auditing invalid TFNs STP: Tax treatment & Phase 2 reporting.
Income types and country codes
Phase 2 requires you to report the income type against payments made to an employee and, in some cases, a country code. This clarifies the employer's reporting obligations with respect to foreign tax and STP reporting concessions and helps the ATO identify amounts with specific tax consequences.
What should you do to prepare?
1. Review income type definitions: The new settings under Pay Run Defaults in Wiise Payroll make it easy for you to report the income type for your employees correctly. Learn more about determining an employee's income type and country code from STP: Income types & Phase 2 reporting.
2. Obtain visa country of working holiday makers: Obtain information about the visa country for your working holiday visa holders, so when the country code setting is made available, you'll be ready to update the information. Learn more STP: Preparing for the new Phase 2 reporting requirements.
3. Review locations assigned to foreign employment employees: If your employees are working overseas their income type will need to be reported as foreign employment. You'll also need to report the host country where the employee is working, as explained STP: Income types & Phase 2 reporting.
Child support deductions
You can now report child support deductions/garnishees from an employees pay in your pay events. This removes the need to prepare monthly deduction reports to Child Support agencies. Initially, this reporting will be voluntary and if you do not choose to report via STP, you'll need to continue reporting monthly to the agency as per the existing processes.
Lump sum e-letters
STP Phase 2 will take away the need to provide lump sum e-letters for your employees altogether, as the information will now be included in the pay event prior to finalisation of employees' Income Statements.
Additional allowance type codes will be added to meet the new reporting requirements. This will allow the ATO to assist the employee when completing their IITR.
Transitioning employees from another payroll system
Businesses transitioning from one payroll system to another will be able to enter the previous BMS ID/payee IDs in the new system and then proceed to use the new system’s BMS ID/payee ID. The ATO will link the information so that there is only one income statement reported for each employee. This replaces the need for manual adjustments to ensure employee YTD earnings are not overstated.
Reach out to Wiise Support if you have any questions.