Single Touch Payroll Phase 2 Hub
Your complete guide to Single Touch Payroll Phase 2.
What is STP Phase 2?
STP Phase 2 is the next set of reporting requirements built on the first phase of Single Touch Payroll. This means all businesses with employees must provide additional payroll information to the Australian Taxation Office and other government agencies.
STP2 in a nutshell
From itemising the gross amount to country codes, we’ve summarised the key changes your business needs to be across as part of your transition to STP Phase 2.
Why is the ATO rolling out Phase 2?
STP Phase 2 is the next step in the ATO’s journey to consolidate, improve data visibility, and support service delivery.
What it means for your business
This depends on the processes and payroll systems that you have in place as well as the number of employees you have. Non-compliance to STP may result in penalties.
Preparing for STP Phase 2
It’s important your business is ready for STP Phase 2 and documents the changes now, so you can switch seamlessly when it’s available in your software.
Disaggregation of Gross Income
Employers must now report each component of income rather than the gross sum. This means itemising salary sacrifice, overtime, paid leave, bonuses, commissions, director’s fees and allowances.
Employees
You will be required to update your existing payroll employee records with the following new fields employment type, income type, home country and tax scale.
Earnings
Know how to categorise your earnings types and ensure they are coded correctly.
Allowances
Review your allowances payroll items and which STP Phase 2 you will need to map them to.
Leave
Ensure your leave items are categorised and coded correctly.
What's changing
Additional data and key things you can expect to change in your STP Phase 2 reporting.
Reckon’s STP Phase 2 Update
Single Touch Payroll Phase 2 (STP 2) is available in all our payroll products. See below for product-specific details.
Reckon One
STP 2 is available in our new Reckon Payroll experience. Upgrade to this new experience via the green banner in your Reckon One book. Once you have upgraded please complete the STP 2 checklist and ensure you are ready to report via STP 2 by your first pay run after 30 September 2023 as Reckon’s deferral ends from this date.
STP 2 how-to help article
Payroll Premier
STP 2 is available in our new Reckon Payroll experience. Migrations to this new experience can be booked in with our specialist team. Once you have upgraded please complete the STP 2 checklist and ensure you are ready to report via STP 2 by your first pay run after 30 September 2023 as Reckon’s deferral ends from this date.
STP 2 how-to help article
Reckon Payroll App
STP Phase 2 is available in the Reckon Payroll App. Please ensure you have completed the STP 2 checklist and are ready to report your next pay run via STP 2 by 30 September 2023 as Reckon’s deferral ends from this date.
STP 2 how-to help article
Reckon Accounts & Hosted
STP 2 is now available in Reckon Accounts & Hosted 2023. Please ensure you have upgraded, completed the migration assistant and are ready to report via STP 2 by your first pay run after 30 September 2023 as Reckon’s deferral ends from this date.
STP 2 how-to help article
Reckon customers are automatically covered by our STP Phase 2 deferral until 30 September 2023. If you need more time beyond Reckon’s deferral, you can apply for a delayed transition to STP Phase 2 reporting for your individual business via the Online services for business platform. You do not need to apply for your own delayed transition if you can start STP Phase 2 reporting by 30 September 2023. See the ATO website for more information.
FAQs about STP Phase 2
What information is reported under STP Phase 2?
STP Phase 2 includes additional fields for reporting, requiring employers to provide:
- Employee’s income type and gross payments
- Allowances, bonuses and commissions
- Paid leave and salary sacrifice
- Employment basis, type, and tax scale
- Country codes for certain employees
- Updated employee records and payroll information
STP 2 also requires employers to report termination reasons when submitting an employee’s final pay. This ensures more accurate income statements, better STP data, and improved pre-filling for employee individual income tax return information.
Do small businesses need STP Phase 2 compliant payroll software?
Yes. Most small businesses with employees must use STP-enabled software or payroll software that supports STP Phase 2 reporting. This ensures you can process payroll correctly, report wages, and meet all ATO requirements for payroll compliance.
What happens if STP Phase 2 reporting is not correct?
Incorrect or incomplete STP Phase 2 data can result in:
- Duplicate or incorrect income statements
- Errors in employee tax reporting
- Issues with ATO online services and pre-filled tax returns
- Potential compliance action from the ATO or other government agencies
- Delays in finalising employee income tax return information
How does STP Phase 2 affect employees?
STP Phase 2 improves how employers report employee information to the ATO. Employees benefit from more accurate:
- Income statements
- Year-to-date tax and payroll information
- Pre-filled tax return data in ATO systems
- Employment and payment history across financial years
This helps employees complete their tax returns faster and more accurately.
What government agencies use STP Phase 2 data?
STP Phase 2 allows employers to streamline interactions across government agencies, including:
- Australian Taxation Office (ATO)
- Services Australia
- Child Support Registrar
- Other approved government programs
This means that employers will no longer need to provide certain information to separate agencies, keeping reporting centralised.
Does STP Phase 2 change tax reporting or income tax returns?
Yes. STP Phase 2 is part of a government effort to increase visibility on the salary and wages paid to working Australians; this information then feeds into employees’ individual income tax returns. This means fewer discrepancies and faster processing of pre-filled tax information.
What happens if a business fails to transition to STP Phase 2?
STP Phase 2 is meant to reduce the burden of payroll reporting. By using non-compliant payroll software, businesses risk rejected STP payroll submissions, leaving them with incomplete payroll totals and leaving employees unable to complete their tax returns.
Finally, the ATO will impose penalties on businesses that fail to transition to STP Phase 2.
Get STP ready today with Reckon
We’ve got ATO compliant solutions to suit any business.
