Single Touch Payroll - Phase 2

If you haven’t already, it’s time to move to STP Phase 2 to stay compliant with the ATO.

A few years after its introduction in 2018, the Australian Government has expanded Single Touch Payroll (STP) with its Phase 2. Under this expansion employers need to report additional information through their STP digital service provider such as Xero or MYOB.

What has changed?

The main changes are as follows:

• TFN declarations will be submitted through STP reporting, rather than through a separate process
• Reporting of income types – salary and wages, closely held payees, labour hire etc.
• Termination reasons to be reported through STP when an employee finishes their employment
• Separate reporting of paid leave, allowance types, directors fees, lump sum W (return to work), bonuses and commissions, lump sum E (back pay for prior income years)
• Tax treatment codes for each employee – an abbreviated way of telling the ATO about factors that can influence the way you withheld tax from payments to your employees

What you need to know

The Australian Government is requiring employers to report additional information such as income or payment type and the reason for any cessations of employment through their STP service. All Australian businesses that have employees on their payroll will be affected by this change.

When does STP Phase 2 start?

The official ATO start date for STP Phase 2 was 1 January 2022. However, digital service providers such as Xero and MYOB have secured extensions to this deadline to ensure a flexible transition into STP Phase 2.

For Xero, employers have until 31 March 2023.

For MYOB, employers should have transitioned by 1 January 2023.

NB. For MYOB users - if you have not been able to make the move, feel free to get in touch with our office for more information.

What you need to do

Digital service providers such as Xero and MYOB are updating their software to offer Phase 2 reporting. They have instructions within their software on what you need to do to be STP Phase 2 compliant. You will need to update the details in your software before the deadline to avoid any penalties. Instructions for Xero and MYOB are at the links below:

Xero: STP Phase 2 Resource Hub | Xero AU

MYOB AccountRight: Getting ready for STP Phase 2 - MYOB AccountRight - MYOB Help Centre

MYOB Business: Getting ready for STP Phase 2 - MYOB Business - MYOB Help Centre