Single Touch Payroll (STP) is a system that allows employers to send information about superannuation and taxes directly to the Australian Taxation Office (ATO) using special software. STP Phase 2, which started on 1 January 2022, requires employers to provide more detailed information, such as separate reporting of salary sacrificed amounts.
In addition to employers providing more detailed information, superannuation funds will also send information to the ATO when employers make superannuation payments. The ATO will match this information with the employer’s STP data to ensure that the correct payments are being made to employees.
After more than a year of STP Phase 2 implementation, the ATO has identified common mistakes made by employers. These mistakes relate to pay codes (how payments are categorised), year-to-date reporting, employee details, and employment status.
Some employers have not set up pay codes correctly, which means that payments like allowances, paid leave, and overtime are not properly separated. Another issue is employers incorrectly selecting “not reportable” or “do not report to the ATO” options. Generally, all amounts paid to employees should be reported, except for specific situations like travel allowances below the ATO’s reasonable amounts or certain post-tax deductions.
Employers who transitioned to STP Phase 2 during the financial year need to ensure that year-to-date reporting is accurate. This can vary depending on the software used, and employers should follow their software provider’s instructions. Comparing the first STP Phase 2 report with the last STP Phase 1 report can help in maintaining correct figures.
As tax time approaches, it’s crucial for employers to have accurate employee information, including name, Tax File Number (TFN), and date of birth, in the STP Phase 2 system. Employers also need to report the correct employment basis (full-time, part-time, or casual) each time they run payroll.
The ATO has noticed that some employers fail to provide the date and reason when employees leave. Under Phase 2, employers should report the cessation date and reason when there are termination-related payments involved. This information helps streamline interactions with the employee and is shared with Services Australia.
Under Phase 2, employers must also report a country code when making payments to employees who earn foreign employment income, are inbound assignees to Australia, or are working holiday makers. The country code corresponds to the employee’s home country and varies depending on the type of income. Using “na” (not applicable) as the country code is incorrect, as “na” is assigned as the country code for Namibia and should only be used if the employee is working in Namibia or is from Namibia.
While most employers are familiar with the detailed reporting requirements of STP Phase 2, smaller employers or those with deferrals may still face challenges with pay codes, allowances, and correctly transitioning year-to-date amounts. If you’re experiencing these issues, we can provide assistance.