The Australian Taxation Office is about to roll out the second phase of its Single Touch Payroll system. The update breaks down payroll information into greater detail and streamlines admin around common actions such as Tax File Number reporting.
What does STP2 mean for bookkeepers?
Better use of payroll data
STP2 is about making it easier for employers to report specific payment details made to employees across different income streams. A lot of the changes are about greater granularity over data that’s already provided.
Using the analogy of a pay envelope, think about STP1 as the front of the envelope, while STP2 opens the envelope and examines what’s inside.
Simeon Duncan, Intuit QuickBooks’ senior manager, international corporate affairs, outlined some of the differences between STP1 and STP2 during a recent episode of the Bookkeeper Radio show.
STP2 start date extension
Bookkeepers can breathe a sigh of relief after STP2’s start date was extended to 1 January 2022, to give small businesses and their advisers time to catch their breath after a difficult 2020. The first STP system was introduced in 2018 for large businesses and extended in 2019 to small businesses. STP enabled payroll software helps to streamline ATO reporting compliance.
Intuit QuickBooks, alongside Australian Business Software Industry Association (ABSIA), has been negotiating with the ATO and federal government to secure an extension to STP2’s scheduled start date.
“This recognises the ‘change fatigue’ many businesses have suffered after the 2019-2020 bushfires, the ongoing drought and then the COVID-19 pandemic,” Simeon says.
“We argued that postponing STP2’s start date will allow a sense of normality to return. It’s not in anyone’s interests to further burden small businesses.
Simeon says the extension is also only fair given the focus most bookkeepers had in 2020 on helping their clients access incentives like JobKeeper, the cash flow boost and early access to super to get through the pandemic.
“Given STP2’s huge potential to produce efficiencies across the payroll cycle, we're pleased the ATO and federal government gave us some extra time to make sure QuickBooks Payroll, powered by KeyPay, continues to provide an intuitive experience for STP2,” he adds.
Here are some of the main changes under STP2:
- The disaggregation of gross earnings is STP2’s standout change. Phase two will separately itemise the components that make up the gross amount by payment types, such as bonuses and commissions, director fees, paid leave, salary sacrifice, overtime, allowances and more.
- Employers will be able to report on employment conditions, cessation times and provide reasons for job terminations to the ATO. This will take away the need for a discrete employment separation certificate to be issued to the employee.
- Tax streaming codes are also changing. At the moment, employee tax treatment information is part of the TFN declaration. Instead, STP2 will introduce a tax streaming code to indicate PAYG tax scales and other components that apply to the employee to determine how much tax should be withheld. Payroll software vendors will be able to implement this in their system for STP reporting, rather than it being a new process for employers.
- STP2 also means changes to TFN declarations. Currently, employers are required to submit a TFN declaration for new employees and existing employees when their tax situation changes. The next STP phase will incorporate employee tax information, eliminating the need to submit tax file declarations to the ATO as a separate process.
How will this change the way I work?
On a practical level, although there’s a lot going on behind the scenes, most bookkeepers won’t notice a huge difference to the way they work
The way STP reports are submitted stays the same and businesses will still report based on their normal pay cycles. The types of payments that are in scope for STP reporting isn’t going to change. Most of the data that will be reported under STP2 is already reported. Essentially, phase two is about remapping data for simpler reporting and admin.
STP2’s benefits for employers
A lighter admin load will be the main benefit for employers from STP2 because employee tax information will be incorporated in STP reporting. Employers are also going to be able to report child support deductions via pay events, which is going to remove the need to report separately on a monthly basis.
“Businesses transitioning from one payroll system to another will be able to use their previous BMS ID, or payee IDs in the new system, meaning less duplication of records,” Simeon explains.
For employees, STP2 makes it easier to understand how they get paid and the different payment types for tax purposes. The benefit will be a clearer understanding of their wages and salary and more streamlined tax admin. All the information will be available in myGov, which means less paperwork and accurate digital records for them and their tax agent.
At Intuit QuickBooks, we’re working closely with the ATO and our partners, KeyPay, to ensure the user experience and payroll reporting is the best it can be under STP2 and everything is ready well before the 1 January start date.
For those who are still looking for a compliant solution for the upcoming final STP1 deadline, then consider QuickBooks Firm Only Ledger, which is specifically designed for trusts and low trading clients.
Contact Intuit QuickBooks today to find out more about how we can help streamline your accounting and payroll functions.