Single Touch Payroll Phase 2 has many employers scratching their heads at present. The definitive Guide published by the ATO can be found by typing QC 66099 into a search engine. The Guide is 102 pages long, which is quite daunting. However, the good news is that most of the hard yards will be done by your payroll service provider, or DSP (Digital Service Provider).
In essence, the Phase 2 information sent to the ATO will be via the same channels as for Phase 1. Nothing changes there. The difference is that Phase 2 requires more detail than Phase 1. For example, if you pay a car allowance you will have to report the type of allowance by selecting from five different types of car allowance listed by the ATO. You might, as another example, have to report the category of leave from 29 categories listed in the Guide. The quick reference guide to all the payment types is on pages 94 – 102 of the reporting guidelines.
You can upgrade your timesheets to provide the additional information before you commence Phase 2. All payroll items will have to be updated with current STP Phase 2 categories. If you find this too daunting, you can continue to submit your timesheets as for Phase 1 and wait for your DSP to ask you for the additional information. The good news is that most of the additional information required will be identified in the first Phase 2 pay period. Once your timesheets are upgraded, there should only be the odd additional piece of information required in future pay periods, so Phase 2 should not be as daunting as it first appears.
There will be some advantages accruing from page 2 reporting. Your employees will be able to see more details in their payslips and this can lead to early correction of errors. Other agencies such as Centrelink and Child Support might receive additional information, negating the need to request the information from you directly. Your employees might be able to lodge their tax returns more quickly using the additional information provided. For example, it is not uncommon at present for payment summaries to show allowances without any details to determine whether these allowances are deductible or not (and it is surprising how difficult it can be to obtain this information in arrears). You will no longer have to send tax file number declarations to the ATO (but please save them in your records). You should no longer need to provide separation certificates when employees leave. In some circumstances the ATO will warn you early if an employee is not having enough tax deducted. This can reduce the risk of an employee receiving an unexpected tax bill at the end of the year.
Already, you do not have to prepare payment summaries, which could be quite a task in the “old days”.
From the ATO point of view, it will now know more about you and your employees than ever before. Why does George Orwell keep popping into my mind as I write this?
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