Single Touch Payroll 2 (STP 2) - Australia : Complete Guide

single touch payroll Australian taxation system

Easy, efficient and quick Payroll management is on every organisation’s wish list. However, the multitude of information you need to maintain and share with the relevant authorities makes the task cumbersome. 

To simplify and streamline employer reporting, the Australian Taxation Office unveiled Single Touch Payroll (STP) initiative in 2018-2019, which will have a significant effect on Australian payroll.

STP aims to facilitate instant reporting to the ATO about an employee’s information such as:

  • Salaries and wages
  • Pay as you go (PAYG) withholding
  • Other super information

Who can benefit from STP?

STP and the upcoming STP 2 will be beneficial for businesses that need to submit their reports related to wages/salaries, PAYG withholding and superannuation to the Australian Taxation Office. Compliance to STP has been made mandatory and organisations will need to upgrade their payroll systems to comply with STP 2.

Key STP Timelines:

  • STP reporting commenced on July 1, 2018.
  • STP was extended to include all businesses, even those with 19 or fewer employees from July 1, 2019, onwards.
  • STP 2 reporting is scheduled to become effective on January 1, 2022.

STP 2 – Next-Gen Reporting

The Australian government announced in its 2019-2020 federal budget that the data collected through Single Touch Payroll (STP) will be further expanded by the ATO in the form of STP 2 compliance.

In the next phase of STP, there is going to be a strategic shift of the reports as they move away from the ‘Payment Summary Annual Rules (PSAR)’ and Payment Summaries for allowances and deductions to ‘Income Types.’

STP 2 will require you to change the structure of the XML file that had been earlier integrated by the payroll providers; Ramco offers a more comprehensive and efficient model that will be compliant to STP 2 reporting.

Apart from the existing inputs, there will be a number of other payments which are likely to require separate reporting under STP 2 provisions. Thus, the overall reporting structure will become more comprehensive and detailed.

These might include:

  • Country Income
  • Salary Sacrifice
  • Bonuses and Commissions
  • Overtime
  • Directors’ Fees
  • Paid Leave (including Leave Payment Type and OTE status)
  • Deductions (including Type, Amount and Variation Reason)
  • Child Support Payments

Apart from the above inclusions, we are likely to see certain changes in the Fringe Benefits under STP 2. Unlike the present system of reporting the RFBA Taxable Amount and the RBFA Exempt Amount, the ATO will now require RFBA Exemption Status and RFBA Amount.

Such changes could bring about some realignment of rules which were aimed to meet the Phase 1 requirements. In light of this, organisations can employ payroll software that will allow them to keep abreast of changes impacting wages and payroll, besides integrating well with other systems to offer a seamless payroll process

Whole of Government

One of the biggest enhancements brought about by STP Phase 2 is going to be the Whole-of-Government approach. Under the new system, various other government agencies apart from ATO might seek to use the payroll data submitted to ATO for their use. The agencies that are set to get such access are Child Support Agency (CSA), Department of Social Services (DSS), Department of Human Services (DHS) and Department of Veterans Affairs (DVA).

The access to various government agencies is going to play a role in the decision-making processes and the delivery of services by them. Thus, data accuracy and integrity emphasis are now going to be greater than ever, since it is likely to not only impact a specific organisation and its employees, but the rest of the Australian public as well.

Since STP is mandatory and you will soon need to migrate to STP 2 protocols, the time is ideal for you to let Ramco take care of your STP integration needs, offering you the assurance of timely and regulatory compliances. If you want to know more, write to contact@ramco.com.

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