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07 Oct 2021 Member Advocacy

Single Touch Payroll Phase 2 — update by Senior Advocate, Robyn Jacobson, CTA

It is timely to provide an update on the implementation of Single Touch Payroll (STP) Phase 2.

The expansion of Single Touch Payroll (STP) — referred to as ‘STP Phase 2’ — to include additional information will reduce the reporting burden for employers who need to report information about their employees to multiple government agencies, including Services Australia. The mandatory start date for Phase 2 reporting is 1 January 2022.

It has always been intended that digital service providers (DSPs) can apply for deferrals that will cover any of their clients who use their solution. However, The Tax Institute and the other professional bodies have been advocating for a deferral for employers, many of whom would have found it difficult to meet their new reporting obligations from 1 January 2022, given the ongoing focus on COVID-19 support measures.

It is therefore pleasing to see that the ATO recently advised that:

  • If your Phase 2 reporting solution is ready for 1 January 2022, you should start Phase 2 reporting.
  • If you can start Phase 2 reporting before 1 March 2022, you will be considered to be reporting on time and you will not need to apply for more time.
  • If you need more time, you will be able to apply for a delayed transition from December 2021.
  • The ATO will not impose penalties for genuine mistakes for the first year of Phase 2 reporting, that is, until 31 December 2022.

This is the second shift in the hard deadline, after the ATO deferred the initially proposed start date of 1 July 2021 to 1 January 2022, in response to a Joint Bodies submission in December 2020 which pointed to the substantial and abnormal pressures on employers in dealing with the impact of the COVID-19 pandemic.

Key benefits of STP Phase 2

STP Phase 2 will provide the following key benefits:

  • Allow reporting of income types, such as salary and wages, closely held payees, working holiday makers, foreign employment income, seasonal worker programme, voluntary agreement and labour hire;
  • Allow separate reporting of gross, paid leave, allowances, overtime, bonuses and commissions, directors’ fees, lump sum W and salary sacrifice, instead of reporting a single gross amount;
  • Remove the need to send employees’ TFN declarations to the ATO;
  • Enable advising the ATO if a concessional reporting option, such for as closely held payees, is being used;
  • Remove the need to provide Lump Sum E letters to employees;
  • Allow software or an employee’s payroll ID to be changed;
  • Allow the sharing of payroll information in near real-time with Services Australia;
  • Remove the need to provide separation certificates when employees leave; and
  • Allow voluntary reporting of child support deductions and/or garnishees.
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