Single Touch Payroll Phase 2 (STP2) - Transition Guide
Summary
Before making your first Single Touch Payroll Phase 2 (STP2) submission, there are some new employee and pay details that will be need to be added or reviewed. When you first open the Single Touch Payroll tab after upgrading, you will be presented with a list of items to addressed, but please also read this guide to ensure all necessary steps are covered.
The following assumes you have been using STP prior to Phase 2 and are familiar with the general process. This article focus on the changes between STP1 and STP2.
Income Type
The ATO requires pays to employees to be classified under one or more Income Types. Most employees will have one Income Type for all their pays unless there is a change to their employment arrangement. Cashbook allows the Income Type to be set at an employee and pay level. Each employee that is paid during the financial year must have an Income Type set before a submission can be made.
Cashbook currently supports these Income Types:
- Salary and Wages - Most commonly used Income Type.
- Working Holiday Makers - Employees on a Working Holiday Maker visa.
- Seasonal Worker Programme - See: https://www.ato.gov.au/business/payg-withholding/in-detail/seasonal-worker-program/
- Voluntary Agreement - Contractors that have PAYG tax withheld.
- Closely Held Payee - Individual directly related to the entity from which they receive payments.
To set the income type:
- Go to Payroll -> Employees
- Edit the relevant employee.
- Go to the Tax and Super tab.
- Select the Default STP Income Type.
- Click OK, or use the Previous and Next buttons to setup other employees.
If you are uncertain which Income Type to use, please speak to your accountant or the ATO.
Tax Treatment Code
STP2 includes the concept of a 6 character Tax Treatment Code. Each character represents an aspect of a employee's tax status and withholding arrangement.
Cashbook ties the Tax Treatment Code to the Tax Scale and each Tax Scale you use for your employees will need one assigned. Some common defaults have been setup in the latest Tax Scales available on our server and if you are not using any custom Tax Scales you may choose to update from the web. These are provided for your convenience and you should verify they are correct for each employee's circumstances.
To view or modify the Tax Treatment Code, go to: Payroll -> Tax Scales and edit the relevant entry.
In instances where multiple employees use the same Tax Scale but different Tax Treatment Codes, you may need to create a custom tax scale.
If you are uncertain of what tax treatment code to use for an employee, please speak to your accountant or the ATO.
Pay Type Categorisation
A key aspect of STP2 is the detailed reporting of pay components. The ATO no longer accepts a simple gross pay amount, but instead seeks the breakdown of the amounts paid to an employee. To adhere to these requirements, you must categorise any pay rates, allowances and deductions that are not a standard hourly or salary rate.
Please review the below list of pay types that must be categorised and follow the directions to correctly classify the payments. Once you generate an STP2 submission, you can verify the amounts are allocated correctly in the Summary screen.
If you are uncertain what STP Category to use, speak to your accountant or the ATO.
Paid Leave, Overtime, Salary Sacrifice
To classify a pay rate relating to paid leave, overtime or salary sacrifice:
- Go to Payroll -> Setup Lists -> Pay Rates
- Add or edit your selected pay rate.
- Select the correct STP Pay Category.
- Click OK to save.
Notes
- Normal hourly or salary pay rates do not need to be classified.
- Reportable Employer Super Contributions (RESC) can also be enabled on this screen.
- Also see our Salary Sacrifice guide for more information about this aspect.
Allowances, Lump Sums, Bonuses and Commissions, Directors' Fees
Similarly to the Pay Rates, these options are assigned in the Allowances tab.
- Go to Payroll -> Setup Lists -> Allowances.
- Add or edit your selected allowance.
- Select the correct Allowance Category. (This field only shows if the Taxable or Pay Summary option is checked)
- Click OK to save.
Workplace Giving, Union and Professional Association Fees, Child Support
Like Pay Rates and Allowances, Deductions can be categorised as Workplace Giving, Union and Profession Association Fees, and Child Support.
- Go to Payroll -> Setup Lists -> Deductions.
- Add or edit your selected deduction.
- Select the correct Deduction Category. (This field only shows if Pay Summary option is checked)
- Click OK to save.
STP Summary
Prior to lodging any STP submission you should review the Year-To-Date totals and breakdown of the pays. We have developed a new STP Summary screen to make this process easier. You will be presented with the new view the first time you generate a Pay Event.
It is important to verify all the details attached to a submission, but the key items to focus on since upgrading to STP2 include:
- Employee status.
- Tax Scale and associated Tax Treatment Code.
- Income Type the amounts are classified under.
- Breakdown and classification of the amounts paid to employees.
- Employer Gross and PAYGW amounts for the period.
The calculation of the employee's Gross figure has changed. It is not the total sum of the employee's pays, but the Year-To-Date sum of any amounts not itemised separately.
In order to Start Lodgement of your Pay Event, you must click the Submission button as above.
Notes
- Employee amounts are Year-To-Date.
- Employer totals are for the period since last reported.
- Every employee paid sometime in the financial year continue to be reported even if they have not been paid in the latest pay period being reported.
- The Pay Period dates are based on the employee's last pay and their default pay cycle.