STP Phase 2, will help to reduce the reporting burden for employers who report information about their employees to multiple government agencies.
The mandatory start date for Phase 2 reporting is 1 January 2022.
Flexible approach to transition:
STP Phase 2 transition will be flexible, reasonable, and pragmatic based on the business readiness or individual circumstances.
A deferral can be applied by Digital service providers (DSPs) who need more time to make the changes and update their solutions to support STP 2.
If you need more time:
- Extensions can be applied for if the transition takes longer
- Delayed transition can be applied by the registered agents
- There won’t be penalties for genuine mistakes for the first year of Phase 2 reporting until 31 December 2022. This includes employers who have already started Phase 2 reporting
Benefits of STP Phase 2
Benefits for employers
STP2 information can be used to streamline employer interactions. For example:
- Sending the employees TFN declaration is not required, employees will provide their TFN declarations, and it can be added to the employee records
- For closely held payees or for inbound assignees using a concessional reporting option, employers can declare to ATO through reporting income types
- In case of a Lum sump E payment, Lump Sum E letters are not required to be provided to the employees. Employers have to include the amount and the period it relates to
- In addition to providing income reports for employees in the ATO’s online services through myGov, it can also be reported in STP
- Separation certificates will also be available in STP report
Benefits for employees:
- As the ATO will have better visibility into the types of income they received and where to prefill on their individual income tax returns. It will be easier for employees at tax time.
- The new information reported to ATO will allow them to tell employees if they have been provided with incorrect information that may lead to them getting a tax bill.
The ATO will also share STP information with Services Australia so they can streamline interactions with their customers. Over time, they’ll use STP data to improve their services by:
- Streamlining claims – their customers won’t need to supply as many documents
- Enhancing Family Tax Benefit processes – by sending SMS and email messages to their customers when they have a new job, their employment has changed or STP data shows their family income estimate may be too low.
- Helping them pay their customers the right amount
- using STP information to improve the customer experience if a customer has a debt to pay. STP information allows Services Australia to understand their customers’ recent employment and income history – this helps them assist customers to repay any money owed.
What isn’t changing
While you’ll need to report additional information in your STP report, there are many things that will stay the same, such as:
- the way you lodge
- the due date
- the types of payments that are needed
- tax and super obligations
- end of year finalisation requirements.
Key changes
The key changes to the STP report include:
Disaggregation of gross
STP report currently includes a gross amount. This is the total of many different components and payment types. Because some of these are treated differently for social security purposes, you will now need to report more details.
Employment and taxation conditions
There are many factors that influence how you manage your employees in your payroll. These include:
- their employment basis
- the information on their TFN declaration
- details of when and why they leave.
You currently provide this information in different ways and on different forms.
Phase 2 streamlines this process by including the information in your STP report.
Income types
You already inform ATO about the type of income your employees receive in your STP report.
The reporting of income types is being introduced in Phase 2 is more flexible in that:
- It identifies payments you make to your employees with specific tax consequences
- It Helps ATO identify where you are using a concessional reporting arrangement.
Country codes
You will need to report a country code and provide information about the host country if you make a payment to an Australian resident working overseas.
Child support garnishees and child support deductions
You’ll have the option to include child support garnishees and deductions in your STP report. This will reduce the need to give separate remittance advice to the Child Support Registrar.
This is optional and not all STP-enabled solutions will offer this functionality.
Reporting previous Business Management Software IDs and Payroll IDs
When you change your company structure or change the software your company uses and cannot delete or complete previous records, you may have the option to provide ATO with previous Business.
Management Software IDs and Payroll IDs in your STP report.
Providing this information will help fix issues with duplicate income statements for employees in ATO online services.
This is optional and not all STP-enabled solutions will offer this functionality.
What’s next
Your DSP will update their STP-enabled software to offer Phase 2 reporting. When your STP-enabled solution is ready, your DSP will let you know what you need to do.
There are some things you can do now to prepare, such as:
- review the STP Phase 2 employer reporting guidelines
- consider how some of the information you already report through STP is changing
- find out what new information you’ll need to report and consider where you capture and store some of this information now, if it’s not in your payroll system
- review your business and payroll processes, and plan for how and when you’ll need to do this.
