If you are an employer, then you will no doubt be aware of Single Touch Payroll (STP) and your obligations to be compliant to the STP2 changes that all employers must complete before 31st March 2023.
The Government announced in the 2019-20 Budget, that Single Touch Payroll (STP) would be expanded to include additional information. The additional information will include details such as income or payment type, reason for cessation of employment, paid leave taken, Directors fees, allowances, bonuses and commissions, Salary Sacrifice and Lump Sum E payments – these will now all be reported separately each time you file your STP.
If you have Xero Payroll software they have been preparing for this transition for quite some time as STP2 reporting came into effect on the 1st January 2022. Xero have secured a deferral for their customers until 31st March 2023 to make sure that everyone has made the changes in their software and are compliant. Certain changes need to be made within your Xero software and there is a step by step guide within the Xero payroll package for you to make all the changes necessary and updates to pay items, leave categories, employment and tax type details.
If you have other payroll software you will need to be aware of the deadline and make sure that the software is compliant, that you have made the transitional steps and everything has been updated to accommodate the changes. Otherwise you will need to check with your Digital Provider to ensure they have secured a deferral. They can apply for a delayed transition deferral via the ATO website.
STP2 will provide a more detailed digital way of reporting all these items and categories below to the ATO which in turn should make filling out personal tax returns for employees easier.
The categories that will be affected by STP2 and need updating in your software are as follows.
- Employment type (Employee or Contractor)
- Types of Income (now specified – Salary & wages, Closely Held, Working Holiday maker)
- Overtime (used to be reported in with OTE, now has its own reporting category)
- Paid Leave (Annual, Personal, LSL – used to be included in OTE)
- Allowances (9 separate specified categories)
- Directors fees
- Lump Sum E (removes the need for a separate form to the ATO)
- Bonuses and Commission (taxed differently using Schedule 5)
- Cessation of Employment (removes the need to issue a Separation Certificate)
- PAYGW payable (separated into the different tax rates/types)
- Salary Sacrifice