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STP Phase 2 - Tax Tracking Type changes in Reckon Accounts

Payroll Items

There will be no automated updates on your existing Payroll Items during the upgrade of your Company file to Reckon Accounts 2023. It is the obligation of the Payroll person to ensure that the Payroll Items are updated in accordance to the ATO STP Phase 2 requirements.

Refer to Single Touch Payroll Phase 2 employer reporting guidelines | Australian Taxation Office (ato.gov.au) as a guideline in order to be able to set up your Payroll Items correctly.

These changes can be made individually per Payroll Item, or we recommend utilising the Migration Assistant to perform bulk updates. There is also a Prefill option that is available in the Migration Assistant to prefill data where there is some certainty on how the Payroll Item must be set.

However, take note that a newly created Payroll Item is assigned with the default Tax Tracking Type based on STP Phase 2 requirements for:

  1. Annual Leave
  2. Personal Leave
  3. Paid Parental Leave
  4. Overtime
  5. Bonus and Commissions


Tax Tracking Types

STP Phase 2 reporting will extract information from certain fields in the Company file. One of the requirements is the Disaggregation of Gross, where ATO requires you to differentiate between different payroll item types and classify them accordingly.


The following are excepts from Reporting the amounts you have paid | Australian Taxation Office (ato.gov.au)

Reckon Accounts 2023 has expanded the different tax tracking types into:

Gross Pay Items

TAX TRACKING TYPE

DESCRIPTION

Overtime

When an employee works extra time and can include work done:

  • beyond their ordinary hours of work
  • outside the agreed number of hours
  • outside the spread of ordinary hours (the times of the day ordinary hours can be worked).

Bonus and Commissions

Payments to reward their performance, service or for meeting a specific goal. 

Directors' Fees

Payments to:

  • the director of a company
  • a person who performs the duties of a director of the company
  • a member of the committee of management of the company, or as a person who performs the duties of such a member if the company is not incorporated.


Allowances

The existing Allowance Tax Tracking Types have been updated to STP Phase 2 during the upgrade process. These are the only types that were updated in Reckon Accounts 2023 as the Tax Tracking Types have been repurposed.

These are the direct conversion of the previous Allowance types:

STP Phase 1

STP Phase 2

Allowances - Car

Allowance – Cents per Kilometre

Allowances - Transport

Allowance – Award Transport Payments

Allowances - Meal

Allowance – Overtime Meal Allowances

Allowance - Travel

Allowance – Domestic or Overseas Travel and Accommodation

Allowances - Laundry

Allowance - Laundry

Allowances - Other

Allowance – Other (General)


The supported Allowance types in Reckon Accounts are:

TAX TRACKING TYPE

DESCRIPTION

Allowance – Cents per Kilometre

Applies to deductible expense allowances paid to employees using their own car at a set rate for each kilometre travelled for business purposes that represents the vehicle running costs including registration, fuel, servicing, insurance and depreciation.

Allowance – Award Transport Payments

Deductible expense allowances for the total rate specified in an industrial instrument to cover the cost of transport for business purposes. Example:

  • allowance payments for the cost of transport for business related travel traceable to a historical award

Allowance – Overtime Meal Allowances

Deductible expense allowances defined in an industrial instrument that are in excess of the ATO reasonable amount, paid to compensate the employee for meals consumed during meal breaks connected with overtime worked.

Allowance – Domestic or Overseas Travel and Accommodation

Deductible expense allowances that are paid for domestic or overseas meals and incidentals and domestic accommodation, undertaken for business purposes, which is intended to compensate employees who are required to sleep away from home.

Allowance - Laundry

This is a deductible expense allowance paid to employees for washing, drying and ironing uniforms required for business purposes.

Allowance – Tool Allowances

Deductible expense allowances to compensate an employee who is required to provide their own tools or equipment for business purposes. Example:

  • Trades staff, who are required by their employer to supply and maintain their own tools of trade
  • An employee required to supply equipment for business purposes 

Allowance - Tasks

A services' allowance that is paid to compensate an employee for specific tasks or activities performed that involve additional responsibilities, inconvenience, or circumstances above the base rate of pay. Example:

  • additional responsibilities
  • first aid allowance
  • leading hand allowance
  • higher duties
  • supervisor allowance
  • on call during ordinary hours allowance
  • inconvenience or disability
  • height allowance
  • dirt allowance
  • danger allowance
  • wet weather allowance
  • confined spaces allowance
  • other circumstances
  • industry allowance
  • site, district, or locality allowance
  • secondment
  • recognition of skill level

Allowance – Qualifications/Certificates

Deductible expense allowances that are paid for obtaining or maintaining a qualification, which is evidenced by a certificate, licence or similar, and is required to perform the work or services. Example:

  • Contribute to the cost of obtaining and maintaining a working with children check
  • Cover the cost of maintaining their non-standard driver's licence, i.e. Ambulance drivers
  • Loss of licence allowance to help the pilot to hold adequate insurance against loss of licence
  • Employees that are required to maintain a liquor licence

Allowance – Other (Non Deductible)

These will be allowances related to an expense which is not work-related, not for business purposes, or is for private purposes.

Allowance – Other (Uniform)

Deductible expense allowances related to uniforms.

Allowance – Other (Private Vehicle)

Deductible expense allowances related to the employee travelling in a private vehicle.

Allowance – Other (Home Office)

Deductible expense allowances related to the employee maintaining a home office (such as allowances to assist with initial set up or running costs).

Allowance – Other (Transport/Fares)

Deductible expense allowances related to the employee travelling on public transport, or in taxis and ride-share services.

Allowance – Other (General)

Deductible expense allowances that don't belong in one of the other codes above.


Leave payments made to employees will now be reported separately. The supported Leave types in Reckon Accounts are:

PAID LEAVE

DESCRIPTION

Leave – Cash out of leave (C)

Pay out leave entitlements in lieu of your employee taking the absence from work. Example:

  • cashed out annual leave and leave loading
  • cashed out long service leave
  • cashed out personal leave
  • cashed out rostered days off 

Leave – Unused Leave on Termination (U)

Payments to your employees for unused leave on termination.

Leave – Paid Parental (P)

All types of paid parental leave must now be reported separately. Examples:

  • government paid parental leave (GPPL)
  • employer paid parental leave 

Leave - Workers Compensation (W)

Some employers pay workers' compensation to their employees, and in other circumstances the insurer makes the payment directly to the employee. Examples:

  • payments for any approved workers’ compensation absence
  • top-up payments made by the employer
  • workers’ compensation payments made after termination

Leave – Ancillary and Defence Leave (A)

There are a range of leave types that are paid while employees participate in volunteer or community activities. Examples:

  • community service leave
  • jury duty leave
  • defence reserve leave
  • all paid absences – including 'make-up pay'

Leave – Other Paid Leave (O)

All forms of paid absences should be reported as Other paid leave (paid leave type O) unless they are required to be itemised using another leave type. Examples:

  • annual leave and leave loading
  • long service leave
  • personal or carer’s leave
  • RDOs (time taken and paid at ordinary rates)
  • TOIL (time taken and paid at ordinary time)
  • compassionate and bereavement leave
  • study leave
  • special paid leave


Lump Sum

There are two changes to Lump Sum payments:

  • The introduction of a new Category: Lump Sum W to report on 'Return to Work Payments'
  • Each Financial Year relevant to the Lump Sum E payment must be reported

The Lump Sum W is available as a Tax Tracking Type in Reckon Accounts.


The Financial Year can now be set for Lump Sum E in the Payroll Item window.


Salary Sacrifice

Salary Sacrifice arrangements are now required to be reported separately. To accommodate this, a new Tax Tracking Type can now be set for Super Payroll Items in Reckon Accounts.

  1. Salary Sacrifice from Super to a complying fund or Retirement Savings Account (RSA)
  2. Salary Sacrifice from Other Employee Benefits

When reporting Salary Sacrifice amounts, instead of reducing the Gross payments, it is linked to the new Salary Sacrifice (Type Code S) tax tracking type. Then, the full gross amount is reported with the Salary Sacrifice separated out and as a positive amount.


How did we do?

STP Phase 2 - Disaggregation of Gross

Permissible Income Tax Tracking Types per Income Type

Related Articles

Single Touch Payroll Phase 2 Overview
How to prepare for Single Touch Payroll Phase 2 - Reckon Web
STP Phase 2 - STP Tax Category in Reckon Accounts 2023
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