Start of Single Touch Payroll (STP) Phase 2 Delayed to 1 January 2022

The ATO announced in a legislative instrument that the start of Single Touch Payroll (STP) Phase 2 – originally intended to begin on 1 July 2021, a date established before the Covid-19 pandemic – would be delayed to 1 January 2022.

The announcement comes as a relief to employers, business owners, software developers, and accountants, who, for the past several months, have argued the original 1 July 2021 start date gave them little time to adjust to the new reporting requirements.

This new start date gives all relevant parties an additional 6 months to prepare for the new reporting requirements of STP Phase 2.

Changes to expect

Under STP Phase 2, businesses must provide more specific payment details to the ATO, including Services Australia and other government agencies.

These include more detail breakdowns of an employee’s gross income, such as: Gross Residual, Salary Sacrifice (including Salary Sacrifice Super and other Salary Sacrifice, Bonuses and Commissions, Overtime, Director Fees, and Paid Leave (including Cash-out of leave, Paid Parental, and Workers Compensation).

Businesses must also report allowances given to employees, including car expenses, laundry expenses, meal allowances, travel, and accommodation.

STP Phase 2 also introduces new fields for businesses to fill out, such as more accurate descriptions of their employment basis, reason for cessation (end of employment), tax scale, and offset amount.

Largely embraced by businesses

Despite the controversy surrounding the start date of STP Phase 2, most businesses actually support the new reporting requirements, as it introduces a significant shift towards complete digital records and reporting.

For employees, STP Phase 2 will make it easier for them to understand how they’re getting paid, and how it’s calculated based on their income type. It will also reduce the amount of paperwork, and enable them to see all of their information in one place – the secure MyGov portal. Furthermore, this will make it easier to submit this information to the ATO come tax time.

For employers, STP Phase 2 promises to streamline the process of collecting and administering payment information to employees, including the ATO and other government bodies.

Employers will no longer be required to manually report child support payments, or provide Separation Certificates.  Lump Sum E will have fields for the relevant financial year the payment relates to eliminating the requirement for a letter to be provided to the employee.

And, for payroll departments and developers, the 6 month delay gives them more time to implement and test new reporting features. This will greatly increase the odds of the new reporting features properly working straight out of the gate.

In addition, even if businesses are not ready to transition to STP Phase 2 by 1 January 2022, they can still seek extra time, if circumstances permit, to which the ATO will take each request into consideration on a case-by-case basis.

Business as usual, for now

So, for the time being, employers and other practitioners can continue to meet their reporting obligations in line with STP Phase 1. They do not have to change the current way they report to the ATO.

Of course, in the lead up to 1 January 2022, payroll practitioners and developers will be hard at work to develop and test these services to ensure they comply with STP Phase 2 requirements.

For existing E-Payoffice customers, you can relax knowing your payroll system will be automatically up-to-date, and compliant with the new STP Phase 2 requirements straight away.


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