It wasn’t compulsory for small businesses to comply with single touch payroll requirements from the start; it is now, though. Phase one of the Single Touch Payroll rollout was implemented from the 1st of July 2018, when companies comprising of 20 or more people had to comply and adopt the system. From the 1st of July 2019, companies with 19 or fewer employees also had to comply with Single Touch Payroll regulations. With everyone on board, STP Phase 2 is being rolled out on the 1st of March 2022. So, this is what every small business needs to know about STP Phase 2.
What Is the Difference Between STP Phase 1 and STP Phase 2?
The first phase of the STP rollout was to get companies familiar with Single Touch Payroll. Companies started working with the software and got used to the system, automatically sending payroll information to the Australian Tax Office as they submitted their payroll information.
STP Phase 1 reporting requirements:
- Super liability information
- PAYG withholding
STP Phase 2 reporting requires more information from employers. This phase will further streamline the payroll and annual tax reporting requirements for companies and their employees.
STP Phase 2 reporting requirements:
- Salary sacrifices
- Paid leave
- Tax scale
- Director’s fees
- Car expenses
- Travel expenses such as airfare and accommodation
- Any amounts which have been offset
- The basis of employment
- Cessation details
- Country codes
- Child support
What Hasn’t Changed with STP Phase 2
While the additional information requirements for the new phase of the STP rollout may seem like a significant change, there are a lot of aspects of the system which haven’t changed. This continuity ensures a smooth transition between phase one and phase two of the STP rollout. Companies will still submit their payroll in the same way and by the same date. Companies will still have the same tax and superannuation obligations. Companies will continue with their regular payments and their annual tax requirements.
How This Affects Small Businesses
The first phase was rolled out slowly for small businesses, giving companies time to find the right software and implement the system. Now that small businesses have trusted software providers, most of the work is already done. To comply with STP Phase 2, payroll administrators will merely ensure that their software is phase two compliant.
The ATO acknowledges there is significant work involved for all parties in complying with the new legislation and has provided avenues to ease this burden on both software developers and employers. For employers additional overhead includes the extended data capture for employees, payment types and processed pays. For software developers there are significant changes to accommodate the extended data capture and to then submit returns under the new STP data structure through the ATO gateway. Part of this work includes an onerous testing regime the Arrow products must satisfy before being allowed to submit data under STP 2.0 specifications.
The ATO suggests
“We’ll support employers by making the transition to STP Phase 2 reporting flexible, reasonable and pragmatic.
Where employers can start reporting from 1 January 2022, we will support and encourage them to do so.
Employers whose solution is ready and can start reporting the expanded data by 1 March 2022 will be considered to have started on time. There is no need to apply for more time.
To be clear, the mandatory start date remains 1 January 2022, this approach is to allow some flexibility to those employers who need it.
DSP (Software provider) deferrals are available if their solution/s will not be ready, and this deferral will cover their clients.
We have already received a number of deferral requests, and expect to be in a position to respond to those requests in the next few weeks.
There is no need for employers to apply for more time where they are covered by their product deferral. For any employers that need more time, an online tool will be made available in December 2021.
Penalties will not be applied for honest mistakes made during the first year of reporting the expanded data. This will cover transitions until 31 December 2022, and include employers who have already started STP Phase 2 reporting.”
For small businesses looking for comprehensive business software which is STP Phase 2 compliant, Tencia by Arrow is the perfect solution. Tencia grows with your business to meet all of your accounting and payroll needs, in line with the Australian Tax Office requirements. For a more detailed look at what Tencia has to offer, contact us today for a full product demonstration.