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Single Touch Payroll Phase 2 Overview

Applies to Australia only

Single Touch Payroll (STP) Phase 2 overview

STP Phase 2 is the next step in the Single Touch Payroll journey and will see Australian businesses reporting additional information to the ATO each pay run.

You will also be required to separately itemize the components which make up the gross amount and report all allowances separately, not just expense allowances that may have been deductible on your employee’s individual income tax return. These new requirements will remain an automated process, handled through your STP compliant Reckon software.

To learn more about the STP Phase 2, visit the ATO Single Touch Payroll Phase 2 website.

To learn about the new required fields, please visit the ATO STP Phase 2 employer reporting guidelines.

Key changes in STP Phase 2

Below are the mandatory STP Phase 2 changes that will be included in your Reckon software.

TFN Declaration
Employers are currently required to submit a tax file number (TFN) declaration to the ATO. Phase 2 will incorporate employee tax information via STP reporting, which eliminates the need to submit tax file declarations to the ATO as a separate process.

Learn more about Income type from the ATO's website.

Income type
You will need to report each employee's income type to the ATO, and you can report multiple income types if they change throughout the year.

Please note that not all income types may be supported by the Reckon software you use.

Learn more about Income types from the ATO's website.

Country code
For your employees on the Working Holiday Maker (WHM) tax scale, you will need to report the country code of their country of nationality based on their working holiday maker visa.

Learn more about Country codes from the ATO's website.

Termination date and reason
Employers are now required to report the reasons for employee termination via STP, eliminating the separate need to issue an employee separation certificate.

Learn more about Termination reasons from the ATO's website.

Disaggregation of gross
In STP Phase 1, the single gross amount you reported contained different types of amounts depending on the income type. In STP Phase 2, all payment types are now reported consistently for each income type.

Instead of reporting a single gross amount, you will now separately report gross, paid leave, allowances, overtime, bonuses and commissions, directors' fees, lump sum W and salary sacrifice. More information for each of these categories are in the next sections.

Learn more about Disaggregation of gross from the ATO's website.

Paid leave
You will need to report paid leave amount separately via the STP Phase 2.

Learn more about Paid leave from the ATO's website.

Overtime
You will need to report Overtime amount separately via the STP Phase 2 and it will not be included in the total gross amount field.

Learn more about Overtime from the ATO's website.

Bonuses and commissions
If you pay bonuses and commission payments to your employees, you will need to report it separately via the STP Phase 2.

Learn more about Bonuses and commissions from the ATO's website.

Directors' fees
If you pay directors' fees, you will need to report it separately via the STP Phase 2.

Directors’ fees include 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

Learn more about Directors' fees from the ATO's website.

Lump sum W (return to work payment)
A return to work amount is paid to induce an employee to resume work. For example, to end industrial action or to return from working for another employer. This is a new category of lump sum payments which is being introduced as part of STP Phase 2. Previously, they were reported as gross and not individually identified.

Learn more about Lump sum W (return to work payment) from the ATO's website.

Lump sum E (back pays)
Lump sum E is an amount of back payment of remuneration that accrued, or was payable, more than 12 months before the date of payment and is greater than or equal to the Lump sum E threshold amount ($1,200). You will need to report Lump sum E via STP Phase 2.

Learn more about Lump sum E (back pays) from the ATO's website.

Allowances
In Phase 1 reporting, some allowances are reported separately, and some are reported as part of Gross. This has changed for STP Phase 2.
You will now need to report the applicable allowances amount separately from the gross. The list of Allowances for STP Phase 2 have also updated.

Learn more about Allowances from the ATO's website.

  1. STP Phase 2 reporting payment types - quick reference guide
  2. Employer checklist
  3. Single Touch Payroll overview
  4. Employer Guidelines


What is not changing in STP Phase 2

  • The way you report Single Touch Payroll
  • The date you report Single Touch Payroll (on or before pay day)
  • The types of employee payments that are required for Single Touch Payroll reporting
  • Your current taxation and superannuation duties
  • End of year finalization requirements and submission responsibilities

Preparing for STP Phase 2

STP Phase 2 requires you to report additional information to the ATO each pay run. Start preparing by collecting all the required information as soon as possible to get ahead of the game.


Employees

You will need to collect the below STP Phase 2 required information for each of your employee.

Type

Affected employees

More information

Income stream code

All employees

View the list here.

Employment basis

All employees

View the list here.

Home country

Employees that are on the Working Holiday Maker visa

Contact the employees/check their onboarding documentation.

Number of dependants

Employees that have Medicare levy reduction.

Learn more about Medicare levy reduction.


Earnings

You will need to categorise your earnings type of payroll items to ensure they are coded correctly.

Type

More information

Overtime

Find out which payroll items need to be categorised as Overtime.

Bonuses and commissions

Find out which payroll items need to be categorised as Bonuses and commissions.

Directors' fees

Find out which payroll items need to be categorised as Directors' fees.


You may have to disable your existing item and re-create it as a different type of payroll item to be able to code it against the STP Phase 2 type if the existing item type cannot be mapped.


Allowances

You will need to categorise your allowance type of payroll items to ensure they are coded correctly. Please note that there are new types of allowances available in the STP Phase 2.

Type

More information

Allowance

Review your allowances payroll items and find out which STP Phase 2 allowance type you will need to map them to. View the list here.


Leave

You will need to categorise the leave items to ensure they are coded correctly.

Type

More information

Leave

Review your paid leave payroll items and find out which STP Phase 2 leave type you will need to map them to. View the list here.


If you have created your leave item incorrectly, for example, Paid parental leave was configured as an Addition, you may have to disable it and re-create it as a leave type payroll item to be able to code it against the STP Phase 2 leave type.


Transitioning to STP Phase 2

You can transition to STP Phase 2 at any time of the year using the hybrid disaggregate method when the Reckon payroll software you use is STP Phase 2 ready.

Using this method, you do not need to separate the gross amounts reported already via STP Phase 1 into its STP Phase 2 disaggregated component. This means that, for the remainder of the financial year when you transition, your STP reporting is a hybrid between STP Phase 1 and STP Phase 2.

However, amounts relating to pay dates after you transition to STP Phase 2 must be correctly reported using STP Phase 2. This means that where amounts need to be separately reported, or reported in a different way detailed in these guidelines, you must do so.

If you choose to use this method, you must:

  1. Ensure your STP Phase 1 reporting is complete and that you have made any corrections that are required
  2. Using the Reckon software, through the STP Phase 2 wizard/checklist to code the STP 2 fields for your employees and payroll items.
  3. Switch to the STP Phase 2

You can learn more from the ATO's website.


STP Phase 2 in Reckon products

You will find out the exact steps to start preparing and switching to STP Phase 2 based on the Reckon product/s you use from below:

  1. Reckon Payroll
    1. Web
    2. App
  2. Reckon One
    1. Upgrade to Reckon Payroll experience to switch to STP Phase 2 by clicking the Go to Payroll from the green banner at the top of your screen.
  3. Reckon Accounts
  4. Reckon Payroll Premier
    1. You should have been contacted by a Reckon representative to help you migrate to Reckon Payroll. Otherwise, please contact us and we will help you migrate your data over to Reckon Payroll to switch to STP Phase 2.


Need more help?

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

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