STP Reporting Made Easy: Tips, Tools and Best Practices

Introduction:

Every business with pink collars needs to complete tasks related to STP (Single Touch Payroll) reporting for their payments and information regarding any employee's superannuation funds and taxes to be correctly lodged with the Australian Tax Office.

While fulfilling your STP obligations can be a complex activity, understanding exactly what you need to do and how often can help ensure that all of your workplace's payments are processed accurately and on time.

In this blog post, we'll provide an overview of STP reporting Phase 1 and Phase 2, including how it works and how to report STP information to ATO. For your ease, we will also discuss tips that can help make STP reporting easier. Read on to get a comprehensive understanding of STP reporting.

What is STP?

Single Touch Payroll is the Australian Government's initiative to minimize employers' worries about paperwork and reporting requirements.

With STP, employers can report personnel payroll information to ATO each time they pay them through STP-enabled solutions. It is prompt and so there are no changes of any details getting missed to be reported to ATO.

• salaries and wages
• pay as you go (PAYG) withholding
• superannuation

Important dates and deadlines

Here are important dates and deadlines that you need to keep in mind:

• STP process became mandatory for employers with 20 or more employees from July 1, 2018.
• From July 1, 2019, the STP process became mandatory for employers with 19 or fewer employees.
• STP reporting Phase 2 began on January 1, 2022.

What is STP reporting phase 2?

STP Phase 2 extends the Single Touch Payroll (STP) program. The mandatory date to start STP Phase 2 was January 1, 2022.

In the 2019-20 budget, the government announced that STP would be expanded to include additional reporting requirements. The additional information will reduce the reporting burden of managers who need to report information about their employees to multiple government agencies. Also, it enhances the administration of the social security system.

The key changes made in STP Phase 2 included the following:

• Disaggregation of Gross:

  In STP Phase 2, there is a different approach to reporting gross income. Instead of reporting a single gross amount as in the STP Phase 1, you will now separately report:

  • Gross salary
  • Paid leave (Annual leave and sick leave are reported separately as leave with pay).
  • Allowances
  • Overtime
  • Bonuses and commissions
  • Directors’ fees
  • Lump sum W (Return to work payment)
  • Salary sacrifice

• Employment and taxation conditions:

  Several factors influence how managers manage their payroll. This includes the following:

  • their employment basis
  • the information on their TFN declaration
  • details of when and why they leave.

  This information was differently provided in different ways and different forms in STP Phase 1. But now, this process is streamlined as employers can provide this information in their STP report.

• Income types:

  The report requirements of income type in STP Phase 2 are more flexible than in Phase 1:

  • Now, employers can easily identify payments that they make to their employees through special tax consequences.
  • It becomes easier for an employees to complete their individual tax returns online.
  • It helps ATO to identify when employers are using a concessional reporting arrangement.

• Country codes:

  Sometimes, employers need to report a country code. For example, if they pay an Australian resident working overseas, they need to provide information about the host country.

• Child support garnishees and child support deductions:

  Employers can now add child support garnishees and deductions into their STP reports, improving efficiency by eliminating the need for sending separate remittance advice to the Child Support Registrar. This functionality is not provided in all the STP-enabled solutions.

• Reporting previous Business Management Software IDs and Payroll IDs:

  To ensure more efficient tax processing, employers can now provide the ATO with previous Business Management Software and Payroll IDs in their STP report. This might occur when there is a change in business structure or software.

What changes remain the same in the STP phase 2 reporting process?

The following changes remain the same in STP Phase 2:

• the way you lodge
• the due date
• the types of payments that are needed
• tax and super obligations
• end-of-year finalisation requirements.

How does ATO single-touch payroll reporting work?

The STP process includes sending tax and super information from your STP-enabled software to ATO when you pay your employee. The information you need to report includes the following:

• Your remuneration details
• Employee income types include salary and wages or working holiday maker income.
• The components which make up the amounts, such as gross pay, paid leave, allowances, or overtime.
• Pay-as-you-go (PAYG) withholding details
• the withheld amount
• information about how the withheld amount is calculated, and
• your super liability information

Once you submit these reports, ATO will process them and update your records accordingly. You will also receive a confirmation message from ATO with the details of what has been processed. This is a great way to track your progress and ensure you’re meeting your obligations.

Transitioning to STP-enabled software

The transition to STP-enabled software is a major change for many managers. Understanding how the transition will work and what you need to do to meet your obligations is important.

Your Digital Service Provider (DSP) will support you in transitioning to STP-enabled cloud payroll software. They will let you know the method that best suits your payroll solutions.

• In an updated event, your DSP will help you provide an opening Year to Date (YTD) balance for all active, inactive, and terminated employees.
• Your DSP will report the balance for all active, inactive, and terminated employees in your initial pay event.
• Your DSP assists you with providing the YTD amounts for employees through an STP pay event and YTD amounts for inactive and terminated employees in a later update event that must be lodged by 14 July or the deferred due date.
• Your DSP assists you with providing the current (YTD) balances for the employees included in your first pay event. Also, they help you give payment statements to terminated and inactive employees and lodge a PAYG payment summary annual report to cover your payments before your first STP pay event. Provided you are transitioning to STP for the first time.
• Your DSP will help you start your reporting with a zero Year to Date (YTD) balance for all your employees.
• Your DSP will help you lodge a PAYG payment summary annual report for payments employers made before their first pay event.

How to report employee payroll information to ATO?

Depending on the software you use, there are three solutions for sending your employee payroll information to the Australian Taxation Office. These are:

• Directly to ATO through your existing STP-enabled payroll or accounting software.
• If your existing payroll or accounting software is not STP-enabled, then employers with 1-4 subordinates can use no-cost or low-cost solutions. These solutions cost $10 per month or less.
• You can ask a third party to report for you, such as a registered tax, BAS lodgement agent, or payroll service provider to lodge single-touch pay events.

How does STP reporting benefit both employers and employees?

• For employers

  • No payment summaries

    Employers no longer need to provide employees with payment details for the amount reported and finalised through STP. It is because this information is already available through the myGov account.

  • Streamline reporting process:

    It helps to streamline the tax and superannuation reporting process. This can help reduce their compliance costs, as they no longer need to spend time manually preparing payment statements or other financial statements reports.

  • Improve accuracy:

    It also helps them ensure accuracy in their payments and that employees receive the correct entitlements.

  • Improve access to information for new jobbers:

    It helps them quickly access information about new jobbers, such as their tax and superannuation details, directly from their myGov account. This can make onboarding new employees more efficient.

  • Encourage digitalisation:

    STP process encourages digitalisation and helps organisations move away from paper-based processes.

• For employees

  • Provide real-time access to payroll information:

    Through STP, employees can access their payroll information in real-time. This can help them better manage their finances and budgeting.

  • Access all payment summary information in one place:

    They no longer need to keep track of multiple payment statements as they can access all relevant information through the myGov website.

  • Tax compliance:

    The STP process helps them ensure that they are meeting their tax obligations and therefore remain compliant with the law.

  • Improved accuracy:

    As employers send more accurate information to ATO, this can help reduce errors in payment statements and other reports, which can help improve employees' overall experience.

Tips for STP reporting

The ATO provides various resources to help employers become familiar with the Single Touch Payroll reporting process. We have listed some tips below:

• Have all your software been set up before reporting? This includes online services and any payroll or BAS software.
• Ensure you don’t forget to report superannuation contributions, as these will not be automatically included in the STP records.
• Ensure that you have all your employee’s tax file numbers (TFNs) and use the correct TFN exemption code for employees who don’t have a TFN.
• Remember to include your business activity statement (BAS) information in the STP records.
• Keep a record of all STP reports sent to the ATO and any responses or confirmations you receive.
• Make sure to use the appropriate software product service identifiers when reporting so they can be matched to your payroll system.
• Ensure you use the right payroll solution for your business size and complexity.
• If you are a related entity, ensure that each ABN in the group is listed correctly in your STP records.
• Ensure all pay codes used in the previous financial year have been retained and updated before beginning or resuming reporting.
• Ensure the email address you supplied for each employee is valid and up to date.
• Ensure all employees’ personal information is entered accurately and securely.
• Contact your software provider if you encounter any errors or issues during reporting.

Following these tips can help prevent common mistakes and ensure employers are up to date with their STP obligations. It could also go a long way in avoiding penalties from the ATO.

Ending note

The introduction of Single Touch Payroll (STP) has changed how businesses report subordinate payroll information to the ATO.

In STP Phase 2, there are even more changes and new requirements for employers. While some things remain the same, like how you report subordinates' payroll information, other aspects have changed.

Although Single Touch Payroll (STP) has been in effect for the last few years, some employers still struggle to get their reporting right. Hopefully, this blog helps you understand the process and what needs to be done to ensure that your reporting is accurate.

For employers still getting accustomed to the process, payroll outsourcing to Accurate can provide the necessary expertise and guidance to ensure payroll reports are accurate.

Our team of experts can offer advice and support for employers struggling with STP reporting and payroll compliance and what needs to be done to ensure that it is accurate.

Reach out to CleanSlate today for more information about our service and what it means for employers. We are a registered BAS agent and can help with all your payroll and compliance needs.