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STP Phase 2 - Tax Treatment Code in Reckon Accounts 2023


ATO requirements

A new six-character Tax Treatment code is to be applied to every Employee, and reported on every Pay Event. This is a code that is generated based on the employee conditions of their tax scales, student loans, and Medicare levy variations that influences the amounts withheld from payments.

When reported, the TFN declaration is no longer needed to be sent to ATO, and it will also notify them of any incorrect information leading to tax time at the end of the year.

A valid Tax Treatment Code is automatically generated by the payroll system based on:

  1. Income tax category
  2. Options available for each tax category
  3. Study and training support loans
  4. Medicare levy surcharge
  5. Medicare levy exemptions
  6. Medicare levy reduction

See How to report employment and taxation information through STP Phase 2 | Australian Taxation Office (ato.gov.au) for more information.


Reckon Accounts implementation

PAYG Tax Rates are calculated in Reckon Accounts using the Tax Code setting for each employee.

The new STP Phase 2 fields in Reckon Accounts does not affect any payroll calculation. These new fields are used for STP Phase 2 reporting purposes only. Therefore, continue to use the relevant Tax Code for each employee.

In order to capture the components used for the Tax Treatment Code, we have implemented new fields within the Employee record. We have also reused existing fields to support the STP Phase 2 requirements, such as:

  1. Tax Codes – based on the Tax Scales used.
  2. Study and training support loans (STSL) – based on the selection of HELP Debt or SFSS.
  3. Medicare levy exemptions – based on the Tax Scales: 5-FullML (Full year exemption) or 6-HalfML (Half-year exemption).


New tax treatment fields

  1. Income Type – classifies the type of withholding payment that is being reported.


  1. STP Tax Category – further classification of the type of withholding payment that is being reported.

The STP Tax Category is used for STP Phase 2 reporting purposes only.

For example, an STP Tax Category: Actor – TFT does not require you to change your Tax Code to 2-TFT. If no Tax scale is appropriate, use 8-No TaxC and enter the correct Tax Rate.


  1. Registered Employer of Working Holiday Makers - a new checkbox option to identify if the entity is a registered or unregistered employer, which influences the payment amount to be withheld for the employees.

Similar to the STP Tax Category, the checkbox to indicate if the company is a Registered Employer of Working Holiday Makers is used for STP Phase 2 reporting purposes only.

For example, use 8-No TaxC and enter the correct Tax Rate for a Registered/Unregistered WHM employer.
Please see Employer registration for working holiday makers | Australian Taxation Office (ato.gov.au).

  1. Commissioner's Instalment Rate (CIR) – notification to the ATO if withholding an amount of tax from each payment made to a contractor.
Once more, the checkbox to indicate whether the employee is under Commissioner's Instalment Rate is used for STP Phase 2 reporting purposes only.

For example, use 8-No TaxC and enter the correct Tax Rate for a Registered/Unregistered WHM employer.
Please see Payments under a voluntary agreement | Australian Taxation Office (ato.gov.au).


  1. Medicare levy surcharge – an additional payment on top of the Medicare Levy required based on the employee's income.


  1. Medicare levy reduction – helps reduce the Medicare Levy they have to pay if eligible by setting the No. of Dependants.



Need more help?

Ask the Reckon Community at: https://community.reckon.com/categories/reckonaccounts

Or

Log a Support Ticket: https://www.reckon.com/au/support/

How did we do?

STP Phase 2 - Income Type in Reckon Accounts 2023

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