Single Touch Payroll changes

The ATO have recently made some Single Touch Payroll changes. You will soon need to start reporting additional information on or before each pay pay. These changes are known as STP phase 2.

Why have these changes been made?

This information will help Services Australia customers (who may be employed by you) receive the right payments. It also reduces the need for you to provide information to multiple government agencies about your employees.

When did it start?

STP Phase 2 started on 1 January 2022. Some digital services providers (DSP) (think Xero) needed more time to get their software products ready for these changes and have secured a deferral.

What do you need to do? (Xero users)

If you are currently using Xero for your payroll processing, you may have already noticed some changes. Xero have implemented new payment types that help capture more detailed payroll information that will be needed for STP phase 2.

These are:

  • Bonuses and commissions: In STP Phase 2 these will be reported separately, where in the past they were part of gross payments.
  • Lump sum W: (return to work) payments – this was previously reported as a gross sum, this will now be reported separately.
  • Lump sum E: This will be used when making lump sum back pay payments from prior income years and is now done via STP in lieu of a letter.
  • Director’s Fees: If you pay director’s fees, these must be included separately in the STP phase 2 reports.
  • New allowance types: Under STP Phase 2 reporting, allowances for tools, task or qualifications need to be reported under new labels.

You can now also add in a termination reason when a staff member leaves your employment. This then overrides the need to issue a separation certificate.

When will these changes be rolled out in Xero?

Xero have secured a deferral for all Xero payroll users until 31 December 2022. To help you and your business transition, Xero will be rolling these out in three phases over the year.

  • Phase 1 – Will commence from April 22 onwards. This includes updates to the way employee records are set up in payroll, ensuring STP Phase 2 is compliant.
  • Phase 2 – This will begin mid year. It will extend the set up process to enable the transition of existing employee payroll records to be STP Phase 2 compliant.
  • Phase 3 – The final stage will be available in the second half of the year. It will see the new items from STP Phase 2 finalised in Xero.

As mentioned above, many of these new pay items are all ready available to use in Xero.

If you would like any further detail of the changes Xero have already made please refer to this article.

What do you need to do (other software users)

You will need to start reporting the additional information when your product is ready. Many DSPs are releasing changes progressively. Your DSP will provide you with instructions and it’s important that you follow them. If you have not received information about these changes, please let our office know and we can assist you in this matter.

The ATO have also provided resources to help you understand these changes and prepare. You can access these at https://www.ato.gov.au/Business/Single-Touch-Payroll/News,-events-and-resources/?=redirected_STPresources

If you have any further queries please do not hesitate to contact our office on 02 6362 8255.