The Australian Taxation Office (ATO) made Single Touch Payroll Phase 2 mandatory at the beginning of last year. As of January 2022, businesses of all sizes must comply with STP Phase 2 when reporting their payroll data.
Key data fields that must now be included as part of STP Phase 2 are:
- Deductions and allowances
- Overtime
- Employee start date (must be reported within 28 days of starting)
- Salary sacrifice
- Contractor payments
Your business may already keep a record of this information, but not report it. Or, you may not track this information at all. The changes aim to improve the accuracy and completeness of payroll data reported to the ATO.
How will this affect your business?
STP Phase 2 means an increased reporting burden for businesses. It could also mean more time spent on compliance as you get to grips with the new method. Ultimately, though, the new requirements should benefit your business.
Reporting accurate and complete payroll data may make you less likely to be audited by the ATO. The new reporting requirements could also help businesses identify issues in their payroll data and correct them before they become bigger problems.
The changes will also make it easier for employees to fill out a tax return by allowing the ATO to pre-fill more information.
How to maintain Phase 2 compliance
The best way to ensure you comply with STP Phase 2 is with a review of your current payroll process. You may need to update your software or engage a payroll provider. Employees should also be aware of the changes, so we recommend running a session to explain the new information they need to provide.
Here are some ways your businesses can adapt to the ATO’s changes:
- Attend ATO webinars or seminars on STP Phase 2 to gain a better understanding of the requirements and changes.
- Review and update payroll processes to ensure compliance with the new STP Phase 2 regulations.
- Test the new payroll software to ensure it can handle the increased data requirements.
- Train employees on the new STP Phase 2 requirements and how to use the updated payroll software.
- Conduct a data audit to ensure all employee data is accurate and up to date.
- Develop a communication plan to keep employees informed about the upcoming changes and how they will affect their pay.
- Collaborate with your payroll software provider to ensure they are ready for the STP Phase 2 changes.
- Ensure your payroll team is prepared to handle any questions or issues that may arise during the transition period.
- Monitor ATO updates and news for any changes or extensions to the STP Phase 2 rollout.
- Consider hiring a third-party consultant to assist with the STP Phase 2 transition process if necessary.
Compliance made easy with Saab
Partnering with a business advisory firm such as Saab makes complying with STP Phase 2 stress-free. Our expert accountants can fully manage your payroll, from employee onboarding to post-termination. Our advisers know STP inside out, so they can integrate the best systems and processes for your business.
Learn more about Saab’s payroll management service if you’re not sure whether your current system complies with STP Phase 2. If you want more information, feel free to reach out to the team. We’re always happy to offer advice – just book a meeting to get started.