As business owners ourselves, we understand the huge amount of work you have on your plate each day. Sometimes it can feel like there aren’t enough hours to juggle customers, employees and the financials, let alone tax and superannuation compliance. To lighten the workload of busy Aussie business owners, Single Touch Payroll (STP) was born.
The Australian Government first introduced the Single Touch Payroll initiative on 1 July 2018 as a way to streamline the reporting process for employers with more than 20 employees. On 1 July 2019, STP became available to employers with 19 or less employees. In fact, it is now mandatory for all Australian businesses to use Single Touch Payroll, so if you’re not already set up and reporting to the ATO each paycycle, make sure to reach out to your accountant or bookkeeper .
Single Touch Payroll enables employers to report their employees’ payroll information directly to the Australian Taxation Office (ATO) through Single Touch Payroll-enabled software, each time they are paid. This means that employers no longer need to provide employees a payment summary for the information already reported and finalised through the Single Touch Payroll system.
With this process in mind, there are further updates coming to the Single Touch Payroll system that are set to streamline the reporting process even further. These updates will be rolled out in an initiative titled ‘Single Touch Payroll Phase 2’.
What is Single Touch Payroll Phase 2?
Single Touch Payroll Phase 2 will see a reduction in the reporting burdens that many employers face when reporting information about their employees to multiple government agencies. Employers must report the additional information through Single Touch Payroll on (or before) each pay day.
Phase 2 will also make it significantly easier for employers to report specific payment details made to their employees across all of their income streams.
Single Touch Payroll Phase 2 (also known as “the expansion of Single Touch Payroll”), was announced in the 2019-2020 Australian Government budget with mandatory reporting set to begin on 1 January 2022.
Key Features of Single Touch Payroll Phase 2
Automated Reports
Because of automated reports, employers will no longer need to provide a separate report for child support agencies. Instead, the agency will automatically receive any reports for wage garnishment and deductions throughout the period.
Ease of Completing Tax Returns
When making payments to employees who have specific tax consequences, with the roll-out of Single Touch Payroll Phase 2, employers will begin reporting on income types and country codes. This will make the process of completing individual tax returns significantly less complicated.
Itemised Components
The Single Touch Payroll report will separately itemise the components that make up the gross amount. This includes:
- Overtime
- Salary sacrifices
- Bonuses
- Director fees
- Paid leave
- Allowances
- Commissions
Reporting of Salary Sacrificing
In Single Touch Payroll Phase 2, employers are required to report any of their employees’ salary sacrificed amounts in the Single Touch Payroll report. From 1 January 2022, salary sacrifice contributions will no longer be able to count towards a minimum superannuation guarantee, or be used to reduce ordinary time earnings.
Changes to Lump Sum Payments
The expansion of Single Touch Payroll will also see changes to how Lump Sum payments will be categorised. They will now be categorised as:
- Lump Sum E (when Lump Sum payments are back paid or made in arrears)
- New Lump Sum W (return to work payments)
Increased Security
The updated reporting capabilities will result in improved privacy and security measures. With additional transition fields around the use of IDs, and ensuring that sessions time out (so previous data isn’t shown on the screen), your data will be more protected and secure than ever.
What Won’t be Changing with the Roll-out of Single Touch Payroll Phase 2?
While you’re required to make changes to some of the ways in which you report additional information to the ATO in your Single Touch Payroll report, there are some things that are still saying the same. From 1 January 2022, the following items will be exempt from changes:
- The way in which Single Touch Payroll reports are lodged
- Submission dates of Single Touch Payroll reports (Single Touch Payroll reports will still be required to be submitted on or before pay days, unless the employer has been granted a reporting concession)
- Taxation and superannuation obligations
- End of year finalisation requirements
- The types of payments used for Single Touch Payroll reporting
Next Steps
For now, there’s nothing you need to do in order to prepare yourself and your business for these changes. The ATO has announced it will be releasing further updates in the lead-up to 1 January 2022.
To stay up to date with any further updates, and to discuss what the implementation of Single Touch Payroll Phase 2 will look like for you and your business, get in touch with our experienced Melbourne-based bookkeeping team today for a free consultation.
