Preparing for Single Touch Payroll Phase 2

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In the 2019–20 Budget, the government announced that Single Touch Payroll (STP) would be expanded to include additional information.

Where Phase 1 had you reporting employees’ tax and super directly to the ATO, STP Phase 2 expands the program to capture more detailed information. This reduces the compliance burden for employers and individuals, and helps the admin side of things for the ATO and Services Australia.

The mandatory start date for Phase 2 reporting was 1 January 2022, but Digital service providers (DSPs), including Xero, MYOB and Reckon, who needed more time to make the changes and update their solutions to support STP 2, applied for a deferral for their customers.

If you can start reporting by your DSP's deferral date, you don't need to apply for more time.

Important rollout dates for STP P2

Benefits of STP Phase 2

Benefits for employers

The ATO will use the STP Phase 2 information to streamline employer interactions. For example:

You'll no longer have to send the ATO your employees' tax file number (TFN) declarations. Your employees will provide it to you, and you'll need to keep it with your employee records.
If you're using a concessional reporting option, such as for closely held payees or for inbound assignees, you'll be able to tell the ATO through reporting income types.
If you make a Lump sum E lump sum Epayment, you won't need to provide Lump sum E letters to your employees. You'll have included the amount and the period it relates to.
If you change software or your employee’s payroll ID, you can tell the ATO in your STP report if your solution has this functionality. This will help fix issues with duplicate income statements for employees in ATO online services through myGov.

The ATO will also share payroll information you report to them in near real-time with Services Australia. They'll use it to streamline requests:

For you to provide or confirm employment and payroll information about your employees
From your employees to provide employment and payroll information such as pay slips for prior periods.
You may no longer need to provide separation certificates when your employees leave. The date and reason an employee leaves will be in your STP report.

You can also voluntarily report child support deductions or garnishees (or both) through STP. This reduces the need to send separate remittance advices to the Child Support Registrar.

Benefits for employees

Some changes under Phase 2 will help streamline interactions for employees, such as:

The ATO will make it easier for employees at tax time as they'll have better visibility of the types of income they've received and where it should be pre-filled on their individual income tax return.
Over time, the new information reported will allow the ATO to tell employees if they've provided you with incorrect information that may lead to them getting a tax bill. For example, where an employee hasn’t notified you that they have a study and training support loan.
The ATO will also share STP information with Services Australia so they can streamline interactions with their customers. Over time, they'll use STP data to improve their services by: pre-filling details they already know – saving their customers time filling out claims and reports; reducing how often they'll need to contact customers – STP will give them some information that they currently need to confirm by phone or online streamlining claims – their customers won’t need to supply as many documents; enhancing Family Tax Benefit processes – by sending SMS and email messages to their customers when STP data shows their family income estimate may be too low; they have a new job; or their employment has changed.
Helping them pay their customers the right amount
Using STP information to improve the customer experience if a customer has debt to pay. STP information allows Services Australia to understand their customers’ recent employment and income history – this helps them assist customers to repay any money owed