With the busy festive season and new year behind us, we now need to turn our attention to the implementation date of phase 2 of the Australian Taxation Office’s Single Touch Payroll scheme (STP2) – 1 March 2022.
In our first article on STP2 we looked at the big picture: the overall challenges and benefits of STP2 and in the second, we looked in detail at what is without doubt the biggest challenge organisations face in complying with STP2 - disaggregation of gross. This requires employers to provide very granular information to the ATO about what every dollar paid to an employee, casual worker or company director is for.
The onerous task of achieving compliance with disaggregation of gross tends to overshadow some other aspects of STP2, but these are still important.
Nominate a New Point of Contact
One detail that could be an issue your payroll software does not support it is that you must now provide the ATO with both the name, phone number and an email address for a contact person. This will replace what used to be the ‘signature name for payment summaries’.
The ATO has not said why this is required, but it’s likely they will become more proactive in reaching out to businesses over any issues in their reporting. And the more granular information the ATO will receive under STP2 the easier it will be to spot possible anomalies. Like if someone is shown not to have taken any paid leave for more than a year. So, organisations will need to have an appropriately knowledgeable person taking those queries.
Make Sure Employee Information is Always Up to Date
One benefit of STP2 is that it will ensure the ATO always has up to date information on the status of an employee: whether they are casual, or permanent, whether an employer is their principal employer for the purpose of claiming the tax-free threshold.
Under the current regime an employer provides this information with their first payment for an employee and must inform the ATO when any change occurs.
Under STP2, payroll systems will generate a tax treatment code, a six digit code derived from other information provided with each payment notification to the ATO. This code will convey a number of details about an employee’s status.
One key detail in the code that could save employers and employees a good deal of heartache is that it will indicate if an employee is repaying a student loan. If, due to error, the employee is not shown as having a student loan and funds are not being docked from the employee’s pay and sent to the ATO, the ATO should be able to detect this, inform the employer and prevent the employee being hit with a large bill at the end of the financial year. However, we still don’t know whether the ATO will do this.
Optional Tax Instalments and Overseas Employees
Another ‘gotcha’ is when an employee pays tax each pay period in addition to their calculated tax instalment. One reason for this is the Medicare Levy Surcharge imposed on employees who do not have private health insurance. Another is that some employees opt to pay extra tax as a means of accruing savings in the form of a tax refund. Medicare surcharges and such voluntary payments will have to be separately reported in STP2.
Another piece of information employers will need to get from their overseas employees is accurate country information. They might think they know where their employees are from but for STP2 they must know the issuing country of the work visa giving the employee the right to work in Australia.
For more information please on STP Phase 2 please go to our resources page and get ready for March 1 2022.
