Getting Ready for Single Touch Payroll: Phase 2

What’s coming up for Single Touch Payroll (STP) Phase 2? 

As you may know, there’s several upcoming changes to payroll management due to the upcoming rollout of Single Touch Payroll (STP) Phase 2. At BusinessHub, we’ve been working in the background to ensure a smooth transition for you and your team ahead of the upcoming compliance date.  

To help keep you up to date, we’ve gathered the latest news on the STP Phase 2 rollout. As always, our team is here to make sure you have all the information necessary to help guide you through this process. 

Table of Contents:

1. What’s coming up for Single Touch Payroll (STP) Phase 2? 
2. What is STP Phase 2? 
3. When will the changes be rolled out? 
4. What are the key changes? 
   1. Employee reporting changes 
   2. Reporting by country code 
   3. Employment Basis Codes 
   4. Tax Treatment Codes 
   5. Annual tax offset amount 
   6. Cessation reasons 
   7. Payment reporting changes 
   8. Paid Leave
   9. Allowance Payments 
   10. Overtime
   11. Directors Fees 
   12. CDEP Amount
   13. Salary Sacrifice Amount 
   14. Lump Sum E
   15. Lump Sum W (return to work) 
5. Changes for those migrating to MYOB Advanced 
   1. Transferring Payee YTD amounts 
   2. Simplified batch statuses 
6. What's NOT changing? 
7. How can I find more information? 

What is STP Phase 2? 

STP Phase 2 is the next step in the STP journey. While Phase 1 was concerned with reporting employee information to the ATO, STP Phase 2 will capture more detailed information. The benefit? The burden of compliance for employers and individuals will be reduced. It will also reduce administration work for Services Australia. 

Whilst you will need to provide the ATO with more information, the way you submit STP reports will remain.  

When will the changes be rolled out? 

MYOB has secured a deferral for all Payroll users until 31 December 2022. To help ensure a smooth transition ahead of the compliance date, MYOB will be rolling out Phase 2 in three stages over the year. 

Stage one: The first stage will start from April. This will include updates to the way new employee records are set up in payroll, to ensure STP Phase 2 compliance. 

Stage two: This stage will begin rolling out mid-year and extend the set-up process to enable the transition of existing employee payroll records to STP Phase 2 compliance.  

Stage three: This stage will begin in the second half of this year. It will see the new pay items from STP 2 finalised in your MYOB system.  

As a BusinessHub client, we will continue to let you know as these stages progress and make sure you have all the available information needed to make your transition to STP Phase 2 as seamless as possible. This will include education webinars and guides to help you adjust to each stage. 

What are the key changes? 

Employee reporting changes 

In STP Phase 2, the terminology previously known as Payment Summary Type has been replaced with a new term and definition called “Income Type”. 

This change has the most impact on those employee’s currently reported as Payment summary type “Individual Non-Business”. 

The ATO now require this group to be split up into 4 new types. 

• Salary & Waged employees (SAW) 
• Inbound Assignees to Australia (IAA) 
• Closely Held Payees (CHP) 
• Seasonal Workers Programme (SWP) 

MYOB Advanced supports this change by: 

• Providing a new screen where you can review all employees. It includes: 
• An action that defaults the likely Income type 
• Ability to review and update remaining employees where the default update action was unable to determine an employee’s Income type 

• An action to apply the reviewed changes to all employee’s current configuration and historical records 
• The assigned Income type will be visible on the Taxation tab of the Employee’s pay Detail's record 

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Reporting by country code 

Australia has tax treaties with many countries to reduce or eliminate double taxation. Income types must report the YTD income by Country Code to assist Australia to meet its international commitments. This only impacts employees classed as “IAA” or “WHM”: 

• IAA: employees must report the country they were a tax resident of before coming to Australia 

• WHM: employees must report their “home” country 

MYOB Advanced supports the country code you need to capture via a new field called Country, located on the Taxation tab of the Employee’s Pay Detail's record. 

To replace the former Onboarding section there is now a section in the payload called ‘Employment Conditions’. This section captures more information about the employee and is sent in every STP event rather than just once.  

New information captured is the “Employment Basis Codes”, “Tax Treatment Codes” and “Tax offset Amount”. These fields provide context to the changes in the financial amounts for each Pay Event for government agencies using this data. 

Employment Basis Codes 

The employment basis selection was used to help inform the TFN declaration. In STP phase 2 this field has been expanded with new options and will now report in each STP event. 

Existing codes: 

• Full-time  
• Part-time  
• Casual 
• Labour Hire  

Additional codes for Employment basis: 

• Voluntary Agreement  
• Death Beneficiary  
• Non-Employee  

Tax Treatment Codes 

Tax Treatment codes help the ATO identify how the employee’s monetary tax values have been calculated. They are an abbreviated way of telling the ATO about factors that can influence the amount you withhold from payments to your employees. 

The ATO has added this code to help: 

• Reduce the need to send TFN declarations to the ATO 
• Help the ATO identify early where an employee has provided incorrect information 

MYOB Advanced will automatically handle the codes to be assigned to each employee.  

Annual tax offset amount 

Not previously reported in STP Phase 1. 

Your employee may have given you a Withholding declaration which claims an offset amount to reduce the amount you withhold from their pay. You will need to report the amount claimed in your STP Phase 2 reporting. The annual tax offset amount only applies to regular employees who have claimed the tax-free threshold (meaning you can only report this for employees that you report a tax treatment code beginning in RT). 

The ‘Total tax offset’ value is set in the Taxation screen in an Employee’s Pay Details. This value is entered as a yearly total and Advanced will calculate the portion to reduce PAYG in each pay, STP reports the ‘Total tax offset’ value. 

Cessation reasons 

The ATO now collects data that was previously reported to Centrelink via an Employment Separation Certificate. One of the data items the ATO now needs to collect for the Department of Services is a Cessation Reason. MYOB Advanced supports this by: 

• Providing a new screen where you can review all employee terminations and add the relevant cessation reasons. 
• Adding a cessation reason option in the termination wizard. 

Payment reporting changes 

MYOB Advanced supports the following changes for payment reporting by: 

• Providing a new screen where you can review all Pay item’s ATO categories and bulk update pay items 
• An action that defaults the likely Pay item ATO category 
• Ability to review and update remaining pay item categories where the default update action was unable to determine a pay items category 

• An action to apply the reviewed changes to the current configuration and historical records 
• Updating the Pay Item liabilities and Pay item types ATO category’s list values 
• System pay items will be updated for new sites and for existing sites via the action to default categories 

The amount that was reported as “Gross” for Individual Non-business employees in STP Phase 1, will now exclude payments classified as: 

• Paid leave 
• Allowances 
• Overtime
• Bonuses and commissions 
• Directors' fees 
• Lump-sum W 
• Salary sacrifice 

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Paid Leave 

Paid Leave is required to be reported into different groups. These being: 

• Other paid leave
• Paid parental leave
• Workers’ compensation
• Ancillary and defence leave
• Cash-out of leave in service
• Unused leave on termination (paid leave type U) 

Allowance Payments 

In STP Phase 2, you must report all allowances separately. This impacts most income types, not just expense allowances that may have been deductible on your employee’s individual income tax return. 

Don't report: 

• Reimbursements 
• Fringe benefits 

Overtime 

You will need to review how your organisation has been recording/transacting payments relating to Overtime as there will be special cases to be reported as overtime. These include: 

• Time off in lieu 
• Call back/recall allowances 
• On-call/Stand-by or Availability items 
• Some leave loading
• Commissions & Bonuses 
• Identifiable Overtime component of Annualised Salary 
• Part-time additional hours  
• Travelling time
• Driving rates/kms 

Directors Fees 

Directors’ fees include payments to a director of a company, or to a person who performs the duties of a director of the company. In MYOB Advanced your pay items will need to be mapped to the ATO reporting category “Director’s fees” 

CDEP Amount 

CDEP values are no longer reportable. 

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Salary Sacrifice Amount 

STP Phase 2 you must separately report salary sacrificed amounts. When reporting salary sacrificed amounts, there are two new types to report: 

• superannuation (salary sacrifice type S) – for superannuation to a complying fund or retirement savings account (RSA) 
• other employee benefits (salary sacrifice type O) – for benefits other than super. 

These options have been added to MYOB Advanced pay item ATO categories “Salary sacrifice super“ and “Salary sacrifice other“.  

Lump Sum E 

Lump sum E is an amount of back payment of remuneration that accrued, or was payable, more than 12 months before the date of payment and is greater than or equal to the Lump sum E threshold amount ($1,200). 

MYOB Advanced has added the ability to capture the year for Lump sum E payments by: 

• Providing a screen that lists all lump sum E payments, and allows you to select which year the payments relate to 
• Adding a new option in the pay where lump sum E pay items are being processed will capture the FY the payment relates to. 

Lump Sum W (return to work) 

Not previously reported in STP, a “Return to Work” amount is paid to induce a person to resume work. These types of payments must be taxed as “Return to Work” payments and reported as Lump Sum Type-W YTD amounts. 

MYOB Advanced supports this as follows. 

• Return to work for non-working Holiday Makers
• Pay item with the ATO Category set to “Lump Sum W“ 
• Pay item set with Taxation “Taxable : Custom rate“ 
• Set Legislated ‘Return to Work’ as true  
• Return to work for Working Holiday Makers 
• Pay item with the ATO Category set to “Lump Sum W“ 
• Pay item set with Taxation “Taxable : Standard PAYG“ 

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Changes for those migrating to MYOB Advanced 

Transferring Payee YTD amounts 

In STP phase 1, payers, changing where your data was stored (software product, Company instance) or changing the employee’s employee code, resulted in an employee having multiple payment summary records with MyGov and YTD values being incorrect. 

To help reduce and fix these issues, the ATO has added two new fields to STP: 

• Previous BMS ID (for Employer/software) 
• Previous payroll ID (for Employee/software) 

MYOB Advanced has added: 

• A new field for Previous BMS ID in Companies. Also, the screen now displays the current BMS ID. 
• A new field for Previous Payroll ID in Employee's Pay Details
• A new screen to allow you to send a 'once off' update in alignment with the ATO instructions. 
• This screen allows you to: 
• Select the company the employees have been moved to 
• Select the employees where you need to report their ‘Previous Payroll IDs’ 
• Review the employee's ‘Previous Payroll IDs’ 
• Review the companies 'Previous BMS ID' 
• Submit a ‘once off’ Update STP event to the ATO containing the previous IDS 

Simplified batch statuses 

Status descriptions for STP submissions have been simplified:  

• Submitted 
• Accepted 
• Failed. 

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What's NOT changing? 

The following parts of STP reporting won't change: 

• The way you submit your pay events automatically through completing pays. 
• Due dates for pay events are still on or before payday unless you are eligible for a reporting concession. 
• Taxation and superannuation obligations. 
• End of year finalisation requirements. 

What do I need to do? 

When you're ready to enable STP Phase 2, you need to review, update and validate your data. To help you complete these tasks, MYOB Advanced version 2021.1.4 adds a new STP Phase 2 tab to the Payroll Preferences screen that lists the tasks which need to be completed. 

How can I find more information? 

Looking for more details? If you’d like to find out more about how STP Phase 2 will affect your business, we’ll be running a series of webinars in the coming weeks to help guide you through the process. You can refer to the ATO’s  employer reporting guidelines.  

Keep an eye out for email updates for the latest on how the rollout stages are tracking. We’ll make sure you’re across what’s happening throughout the transition. 

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Disclaimer

BusinessHub Pty Ltd provides support in relation to MYOB Advanced Payroll and MYOB Exo Employer Services, but we do not provide (and should not be relied on for) legal or accounting advice, so we recommend that you contact your professional advisor for this type of assistance.