Payroll

Single Touch Payroll (STP) Phase 2 has been fully rolled out, and compliance is mandatory for Australian businesses in 2025. This enhanced system requires employers to report additional information to the ATO, including income types, tax treatments, and employee details. Staying compliant not only avoids penalties but also ensures accurate and transparent payroll processes. Changes from July 1, 2025 From July 1, 2025, the ATO will require additional reporting on leave balances, including long service leave and personal leave accruals. Employers must ensure these details are correctly recorded and reported. What’s New in STP Phase 2 The latest phase builds on the original STP system by introducing detailed reporting requirements, such as: Disaggregation of Gross Income: Report earnings under specific categories (e.g., allowances, overtime). Expanded Employee Details: Include information like income type, employment basis, and Medicare levy exemptions. Streamlined Tax File Number (TFN) Declarations: Submit TFN details directly through STP-enabled software. Steps for Compliance Upgrade Your Software: Ensure your payroll software is STP Phase 2-compliant and can handle the new leave balance reporting requirements. Review Employee Records: Update employee data to include all required details, such as employment type and income categories. Educate Your Team: Train your payroll staff or bookkeeper on new requirements to minimize errors. Conduct Test Runs: Use your software’s testing features to identify and fix issues before live submissions. Benefits of Compliance STP Phase 2 reduces administrative burdens by automating many reporting tasks. It also enhances transparency with the ATO and improves accuracy in employee tax records. Common Mistakes to Avoid Incomplete Employee Details: Missing or incorrect information can lead to rejections or penalties. Neglecting Transition Deadlines: Ensure your systems are fully compliant by the specified dates. Overlooking Allowances: Properly categorize allowances and deductions in line with ATO guidelines. Future-Proofing Your Payroll Regularly review your payroll processes to stay ahead of legislative changes. Partnering with an experienced bookkeeper or accountant can provide peace of mind and ensure long-term compliance. Useful Link: STP Phase 2 Guide