What is it?
As mapped out in the 2020 Federal Budget, STP was expanded to include additional information to be reported to the Tax Office.
When does it apply?
The new reporting measures commenced 1 Jan 2022, and employers need to report before 31 Mar 2022 to be compliant under the new regime.
However, if using certain payroll software (eg Xero Payroll, Wagemaster, MYOB) you have been granted a reporting deferral to 31 Dec 2022.
For other STP payroll software providers and those NOT using STP payroll software, there is no deferral.
Please note your software provider will automatically apply for the 12 month extension and you should be advised as such. When functionality is updated by your payroll software provider, we’ll provide additional support around setups and coding to help you transition and adapt.
Late or missed reporting penalties are $210 for every 28 days your report is overdue to a maximum of $1,050 for small businesses, $2,100 for medium entities, $5,250 for large entities.
Under STP Phase 2, genuine reporting mistakes will not be penalised in the first year until 31 Dec 2022.
Notable Phase 2 changes to be aware of are.
Income type and country codes
You already advise the Tax Office on the type of income your employees receive via your STP report. STP Phase 2 introduces additional reporting with the aim to:
- Identify payments you make to your employees with specific tax consequences.
- Make it easier for an employee to complete their individual income tax return
- Help the Tax Office identify where you are using a concessional reporting arrangement
- Report to the Tax Office on Australian residents working overseas.
The significant changes to income reporting include a disaggregation of gross income. This can be summarised as follows.
Phase 1 - Not Reported in Gross
- Paid leave
- Bonuses & Commission
- Directors' fees
- Lump sum W
- Salary Sacrifice amounts (post only)
Phase 2 - Reported in Gross
- Ordinary hours worked
- Casual loading
- Shift penalties
- Payment to employees on Workers' Comp who are at work performing duties
- Piece rate work performed during ordinary hours
- Daily rates for employees compensated
- Flexi time
- Breach of rest break payments
- Time for travel or training
- Salary Sacrifice amounts (pre and post)
More Phase 2 changes to be aware of are.
Businesses will have the option to include child support garnishees and deductions in their STP report, reducing the need to provide separate advice to the Child Support Registrar.
Lump Sum E payments
This is used when you make lump sum payments for back pay from prior income years. Previously, this was shown on a separate line item in an employee’s payment summary. STP Phase 2 requires these payments to be reported with the tax year they originated in, before finalising an employee’s records. This removes the need to provide employees with Lump Sum E letters.
Tax file number (TFN) declarations
Employers are currently required to submit a TFN declaration to the Tax Office. STP Phase 2 will incorporate employee tax information via STP reporting, which eliminates the need to submit TFN declarations to the Tax Office as a separate process.
Specifying a reason for termination will be mandatory when an employee finishes their employment. Currently, an employer may be asked to provide an employee with an employment separation certificate upon an employee’s termination of employment. STP Phase 2 will require the reason for termination to be included in the STP report sent to the Tax Office and no employee separation certificate is required.
Tax treatment codes
Your STP Phase 2 report includes a six-character tax treatment code for each employee. The tax treatment code is an abbreviated way of telling the Tax Office about factors that can influence the amount you withhold from payments to your employees.
Employer Super Obligations An Update
From 1 Nov 2021, if you have existing superannuation accounts, these will be “stapled” to your current super fund account. Employers are required to identify a new employee’s superannuation account and contribute compulsory superannuation payments to that existing fund. The stapling feature is designed to help prevent people joining multiple super funds when they start a new job, which in turn should cut back on the amount of fees eroding super accounts.
The same Bill which introduced the stapling feature, also introduced “performance tests” designed to expose underperforming superfunds to current members. Accordingly, if your fund is “not cutting the mustard” you may expect to see a letter in the mail informing you of underperformance. If two consecutive failures are experienced, the fund is closed to new members. The performance tests commenced 31 Aug 2021.
Paying On Time
As the Tax Office sharpens its focus on superannuation compliance, we remind employers that Superannuation Guarantee (SG) must be received by the employee’s superannuation fund by no later than the 28th day of the month following the quarter the wages relate to. This means for the recently completed December quarter, SG is due by 28th Jan 2022. In the times of Single Touch Payroll and Superstream, it is especially imperative that SG is paid and reaches the fund before the due date to ensure the amount of SG paid is tax deductible. Furthermore, if SG is not paid before the due date, Superannuation Guarantee Charge must be paid (via lodging a Superannuation Guarantee Charge form with the Tax Office). If SG obligations are not met, the maximum penalty is 200% of the SG. Also note that there is the potential for directors to be held personally liable for the SGC under the Director Penalty Regime.