In the 2019–20 Budget, the Government announced that Single Touch Payroll (STP) would be expanded to include additional information. The expansion of STP, also known as STP Phase 2 (STP2), will reduce the reporting burden for employers who need to report information about their employees to multiple government agencies. It will also help Services Australia’s customers, who may be your employees, get the right payments at the right time.
The mandatory start date for STP2 reporting was 1 January 2022, however, a large number of digital service providers have been granted a deferral, which covers their customers. We are encouraging employers to use this additional deferral time to appropriately prepare.
The purpose of this document is to highlight that STP2 will be a very different experience for employers (and potentially employees) than STP Phase 1. It also proposes 8 key questions you should consider to ensure that your Board and senior management has a higher level of confidence that the organisation is ready for implementation, particularly given the potential impact on your employees.
The value of asking these questions is evident when we explore the number of potential consequences of delayed and/or incorrect reporting for STP2. These could include:
Immediate and direct financial impacts for employees potentially resulting in:
incorrect tax liabilities;
inaccurate child support obligations or payment of social security benefits,
adjustments to access to Medicare benefits; and
changes to superannuation entitlements.
A potential increase in employee payroll related queries resulting from the real time reporting of income information and/or incorrect reporting of pay data to the Australian Taxation Office (ATO) and Services Australia.
Questions to consider
Please see below some suggested questions for those within your business with responsibility for implementing STP2. We also provide some context to these questions for your information.
- Compliance: The granular reporting requirements of STP2 will highlight, in real time, any inconsistencies in the interpretation of your Enterprise Agreement (EA) and/or Award. In short, if an employer is not interpreting its industrial instrument/s correctly and reporting discrete entitlements separately through payroll, it will be difficult to comply with STP2.
- Are you confident in the interpretation of relevant EAs and/or Awards and that the implementation of STP2 will not highlight interpretation errors?
- In addition, has the interpretation of industrial instruments been reviewed and tested within your organisation’s systems for accurate payment and reporting?
- Data Sources: Additional STP2 reporting requirements will require payroll teams to access data sources that are outside the payroll system. Have the data flows and/or system integrations been reviewed to ensure reporting obligations are complete?
Employee impact: STP2 and the disaggregation of gross payments made to employees will provide them with greater transparency of what they are being paid, which in turn, will directly impact the income data that is sent to Services Australia to manage the accurate processing of social security benefits. Have you conducted a full review of how payments are to be reported to obtain confidence that STP 2 will provide the correct information to the ATO and Services Australia?
Pay code mapping: STP2 has expanded the employment and taxation codes to which employee income needs to be allocated. What steps have you taken to determine if your pay codes have been correctly mapped and meet STP2 reporting obligations?
Budgeting and resources: What steps have you put in place so that your payroll/HR/legal teams are ready to address the (potential increased frequency and volume of) queries that will come from employees as STP2 reporting goes live?
Manual processes: Have you reviewed all the existing manual interventions/workarounds used by the payroll function to ensure these are adequately accounted for when STP2 goes live?
Employer Obligations: The STP2 process is another means to ensure that employer obligations are being managed appropriately. Has a detailed review been completed recently to confirm whether each of your pay codes are configured accurately for the purposes of Pay As You Go Withholding (PAYG), Superannuation Guarantee (SG) and payroll tax?
Project planning: Noting the complexities above, are you confident that an appropriate level of planning has been completed and documented and that sufficient time and resources are available to ensure you are ready for the go live date?
If you have any questions about STP Phase 2, please feel free to start a conversation with one of our specialists.
