Preparing for Single Touch Payroll Phase 2

Data to review now

For the majority of Customers, if you are commencing STP from the start of the new tax year there should be very little that you will need to change in your account in order to transition smoothly.

Following are a list of action items that should be completed PRIOR to configuring/reporting via STP V2.

Please follow these steps to begin your STP V2 transition preparation:

Review Employee Data

1.  Navigate to Payroll Administration> Payroll Records > Employees

2. Change the view to STP V2 Review.  

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3. Review the list of employees and confirm that they have the correct information set in line with the Employee Level Changes section of this guide: STP Phase 2 Changes. You can update employee fields where required and you may also want to export the employee list out to Excel or CSV if you have a high volume of data to review.

Review your Allowance Pay Component Sub Types

1. Navigate to Payroll Administration > Payroll Setup > Pay Component Sub Type.  

2. Change the view to PAYROLL – Pay Component Sub Type

3. Set the PAY COMPONENT TYPE filter to Allowance

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4. Click on Edit View

5. On the Results tab, insert fields from the drop box for STP Type Code and STP Allowance Other Type. Add to the search name STP V2 Allowance Review and click on Save As.

6. Review the sub type list and ensure that for any custom created allowance pay component sub types you set the STP Type Code. See this link for more information ATO Allowance Types. For any allowance that is of the type of Other Allowances (OD) you must also set the STP Allowance Other Type field to describe what the allowance is.  You do not need to set either field for the Directors Fees sub type, this is a special code that should be left empty. NB - Any sub types that are part of the Infinet Cloud Payroll bundle should already have these fields pre-populated. 

Review other Pay Component Sub Types

On the same report you can change the Filter from Allowance to ALL and now review your other sub types. If you have created your own pay component subtypes or made changes to our standard ones it is very important that you also review these sub types to ensure they are categorised correctly for STP V2 reporting purposes.

If you are using our standard subtypes then we have automatically updated them - you should NOT need to make changes in order to report correctly. Likewise when it comes to the Disaggregation of Gross if the Pay Component has been setup correctly then the breakdown of the reporting will be done for you automatically when you submit your STP report.

To follow is a table that summarises the fields you should be reviewing for each pay component sub type and the field Infinet Cloud is using for reporting to the ATO. For a more detailed breakdown of each type please see this page Understanding Data Reporting (STP v2)

Review Directors Fees

1. If you pay Directors Fees these must now be reported separately and paid using the Directors Fee Pay Component Sub Type that is part of the Infinet Cloud Payroll bundle. If you have previously paid these fees using a different code you can no longer do this as it will not report this information correctly.

Review any Employees with Manual PAYG pay components for downward withholding declarations

1. Navigate to Payroll Administration > Payroll Records> Employee Pay Components.

2. Change the view to PR-Classification Search.

3. Set the Pay Component Type to Tax.

4. For those employees that have a downward withholding fixed percentage setup you must update their employee record on the Tax Info tab to set the Tax Category to ATO-Defined (D) & the Tax Option to Downwards Variation (V).

5. This will in turn set their Tax Scale to Manual Tax Component. NB: When this Manual PAYG component is no longer required you will need to unset these fields to return the Tax Scale to the previous setting.

STP Phase 2 Summary information

In addition to the above to follow is a summary of some of the key things that are changing and also those things that are staying the same. It is very important that you familiarise yourself with these changes and understand what you need to do in order to report correctly.

We also recommend you review the following articles from the ATO to assist you with this transition and what you should be doing now to prepare.

Single Touch Payroll Phase 2 Employer Reporting Guidelines

ATO Factsheets & Checklists

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STP Phase 2 - What is changing?

Under STP Phase 2, your current reporting process will not change however you will be required to report additional information to the ATO.  We have summarised some of the main changes for you below:

• Disaggregation of gross: Currently, STP reporting is based on a total gross amount which includes all different payment types.  With STP Phase 2, these amounts are now required to be broken down in detail to include everything separately.  So your report will show separate lines for paid leave (including a new code for leave cashout during service), allowances, overtime, bonuses & commissions, directors fees, Lump sum W (new code for return to work payments) & salary sacrifice.  See this link for more information: Disaggregation of Gross NB - Provided the pay component sub types you are paying your employees have been setup correctly then the breakdown of the reporting will be done for you automatically when you submit your STP report.

• Termination reason: The reason why someone is terminated from your business will be included in your STP report e.g if it was voluntary or a redundancy. Employee separation certificates will no longer be required.

• Employment Status: It will be mandatory to report an employee’s work type. This includes full-time, part-time or casual, and also new categories like labour hire, volunteer agreement or non-employee.

• Income types: Previously income was classified under one label, in Phase 2 each amount paid to an employee is assigned to an income type. This includes salary and wages, closely held payees, working holiday makers, labour hire etc. It's very important that you classify you employees correctly relevant to these income types.

• Country code: A country code is now required for employees if you make a payment to a working holiday maker, you must also provide information about their home country.

• Tax file number declaration: TFN information will be included in your STP report for each employee which means TFN declarations will no longer need to be sent to the ATO manually.

• Child Support Deduction and Garnishee: Optional reporting to Services Australia

STP Phase 2 - What isn't changing?

While you'll need to report additional information in your STP report, there are many things that will stay the same, such as:

• the way you lodge

• the due date

• the types of payments that are needed

• tax and super obligations

• end of year finalisation requirements.

Previewing a STP Phase 2 Report

With our latest 22.2 release of Infinet Cloud Payroll we introduced the ability to Preview a STP V2 Report The preview functionality allows you to view a report for a Pay Run or Update Event without enabling STP v2. It is not possible to submit the report preview but you can review the information and export it (to excel).

To access this functionality, when generating a pay event (Submit or Update) select Preview STP V2 Report from the More links menu in the top right hand corner.