Single Touch Payroll Phase 2

Changes are currently underway regarding how you manage payroll.

The Australian Government has announced that Single Touch Payroll (STP) will be enhanced to include additional information with Phase 2. If you’re using Xero Payroll, there are a few updates you’ll need to be across but lucky for you, you’ve come to the right spot!

What is Single Touch Payroll (STP)?

In a nutshell, STP is an initiative the Australian Government implemented to help employers reduce reporting burdens to government agencies. It allows you to streamline all processes regarding payroll, superannuation, tax, etc.

Phase 1 started rolling out in April 2021, which included updates to how a new employee record is set up in payroll.

What does Phase 2 include?

While many updates have been implemented, Phase 2 will extend to new additions and improvements to help you and your business stay compliant.

For starters, you’ll see new payment types to help capture a more detailed payroll:

• Bonuses and commissions: Instead of being reported as part of gross payments, these will need to be reported separately in Phase 2.

• Lump sum W (return to work) payments: This amount is paid to induce an employee to return to work, which was also previously reported as a gross sum.

• Lump sum E payments: You used to be able to make lump sum payments for back pay from prior income years via a letter – now, you’ll be able to process this via STP Phase 2.

• Director’s fees: If you pay this, you’ll be required to include these separately in your Phase 2 report.

• New allowance types: Any allowances for tasks, tools or qualifications will need to be reported under new labels.

When does Phase 2 rollout?

STP Phase 2 has already started rolling out! The good news is that Xero has been granted a deferral start date of 31 March 2023, meaning you have until the end of the year to report your first STP Phase 2 pay run.

If you’d like more information or guidance with Single Touch Payroll (STP) Phase 2, please contact our friendly team by booking a consultation here.