With the Single Touch Payroll Phase 2 – or simply STP2 – rolled out at the start of this year, business owners are required to be prepared until 31 March 2023.

Accounting software companies have started implementing the changes to their systems. However, not all accounting software are prepared for the 1 January deadline. Thus, the deferral grant from the ATO that applies to all users.

If you are using Xero, you have a deferral until 31 March 2023.

MYOB users have until 1 January 2023.

Phase 2 has 3 stages of transition:

  1. Employee transition

The first stage that is delivered last August requires business owners to provide their existing staff’s:

  • Employment type – whether the employee is an employee or a contractor
  • Income type – additional pay classifications employees receive
  • Employment basis – whether an employee is full-time, part-time, or casual
  • Tax scale – the individual tax rate applied to each category
  1. Pay items transition

The second stage requires business owners to identify and update certain pay items with new categories in Phase 2.

This transition is delivered last September.

  1. Leave categories

The final stage of the transition will have additional subcategories to break down paid leaves.

Main changes in STP2:

  1. Instead of reporting a single gross amount, you will now have to separately report:
    1. Gross
    2. Paid leave
    3. Allowances
    4. Overtime
    5. Bonuses and commissions
    6. Directors’ fees
    7. Lump sum W
    8. Salary sacrifice
  2. Reporting of employment and taxation information (Read more details from the ATO here).
  3. Amounts paid to your employees will now be assigned to an income type to match specific tax consequences.
  4. Reporting a country code may be necessary depending on your circumstances. For example, you will need to provide information about the host country if you are making payments to an Australian resident working overseas.

What stays the same:

  • How you lodge
  • Due date
  • Types of payments required
  • Tax and super obligations
  • End-of-year finalization requirements

Need help updating your accounting software with STP2?

Your registered agent can apply on your behalf.

Focus Bookkeeping can help you transition on STP2. We also provide quality bookkeeping and BAS services for many businesses.

Read more about us or contact Fabiana today for an obligation-free chat.