In July of 2018, the ATO began the process of converting from a yearly EOFY process for collecting financial employee status and payroll information to that of a per payment period system. This solution is referred to as Single Touch Payroll or STP for short. This involves sending the payroll amounts as well as the employee's year-to-date information electronically through to the ATO to keep their details valid as well as provide transparency to the employees on their earnings via their MyGov portal.
Since then the ATO has worked to migrate most Australian-based businesses to this reporting method, which requires a compliant payroll system to send through the information electronically.
To extend on this as of the 1st January 2022 the ATO has elected to make some changes to help with items such as employee onboarding as well as to provide them with greater transparency relating to items such as employee overtime, paid parental leave payments, and workers compensation, as well as and leave taken.
For more information from the ATO regarding STP Phase 2, please see the following link;
This article contains information relating to items that have been changed as of Version 5.0.0, Build 321 (Release date 27/04/2021) and Version 5.0.0, Build 322 (Release date 19/04/2022) within ClockOn for the purpose of preparing for the STP phase 2 changes
- Working Holiday Maker Registration Status
- Changes To Employee Onboarding
- Additional YTD Record-Keeping Requirements
- Allowance STP Types
- Employee Terminations Types
Working Holiday Maker Registration Status
STP Phase 2 requires you to indicate your Working Holiday registration status.
This setting is located within the Locations Edit screen on the Other tab as shown below.
Changes To Employee Onboarding
Within the scope of STP Phase 2 is the removal of the requirement to submit TFN forms or separation certificates for your employees. As such some additional information is required within the payroll system to complete this information. This includes;
- Tax Category - Mandatory for STP Phase 2
This indicates to the ATO which tax scale the employee should have their calculations based on.
- New Tax Option Added - ATO Defined
Selecting this tax category will enable the Tax Rate field on this screen to set a flat rate of tax for the employee.
Please be aware that this is usually only set for employees classed as Working Holiday Makers, or Contractors. ClockOn recommends that this is to be used in consultation with the ATO.
There are some changes to the submission of Contractors (Income Type Voluntary Agreement) and STP.
Please see below;
- The submission of contractors via STP is still optional and controlled in ClockOn using the Include in STP checkbox.
- If you are submitting to STP and have been advised that the Commissioner Installment Rate is needed, simply set the Tax Category to ATO defined and the Tax Rate to 20%
- If you are submitting to STP and the Commissioner Instalment Rate” is NOT needed, set the Tax Category to ATO defined and ensure that the Tax Rate is NOT set to 20%
- Gross Pay Type
Indicates the type of employment agreement that the employee has with the business ie standard salary and wages, voluntary agreement (ie contractor, with an additional option available as to whether they are to be included for STP), closely-held employee (ie director or family member).
Note: If this field requires changing for an existing employee (for example a contractor becoming an employee) a new card file should be created rather than changing this value.
- Medicare Reduction
Allows you to indicate whether the employee has dependants for Medicare purposes as well as how many. This is simply for employee reporting doesn't affect the payroll calculation or YTD figures.
- Medicare Surcharge
Allows you to indicate whether the employee has a Tier requirement for the Medicare Surcharge. This is simply for employee onboarding and reporting doesn't affect the payroll calculation or YTD figures.
Used when enabling a Working Holiday Maker or Foreign Employment employee to indicate the related country for the work.
- Working Holiday Maker - Where you are from
- Foreign Employment - Where you are working
IMPORTANT The "No Tax" option is not recommended for use. If used, the system will not calculate tax at payroll but will advise the ATO that the employees are using the "Tax Free Threshold Claimed" option. As such it will be up to the user to ensure that the correct tax amounts are being applied.
More detail as to these fields is covered in the Pay Tab - Configuring Employee Pay Structure article.
Additional YTD Record-Keeping Requirements
With STP Phase 2 the ATO will now be collecting information relating to the following items;
- The amounts for Paid Parental Leave paid,
- The amounts for Workers Compensation paid,
- The cost of any other leave that has been taken or paid out to the employees.
- Any exempt foreign income amounts.
- Any foreign tax paid.
This information is recorded on a per-payroll basis and is stored on the Additional tab within the Employee Year-to-Date Earnings record.
Child support is paid via allowances in the system, examples of the allowance setup can be found here.
For the records for Paid Parental Leave, and other leave taken. ClockOn maintains this through the use of leave timesheets.
Time In Lieu payments will be processed as the following
- If taken it will show as Other Leave.
- If cashed out it will be included in the Overtime amount.
For the records for Overtime, ClockOn uses the raw timesheet times in conjunction with the Ruleset configuration to determine the costings amounts.
Please be aware that as per the FairWork requirement you are required to maintain an accurate record of time worked and payment for the employees and ClockOn recommends the use of timesheets within the system to ensure greater STP data accuracy.
If you choose not to record timesheets within the ClockOn system, we highly recommend maintaining your employee time records in a secure fashion in a separate system.
The amounts relating to the Exempt Foreign Income, and Foreign Tax Paid will need to be manually entered into the system, as these amounts do not need to be processed through payroll. Please refer to the ATO as to if you are required to enter these values.
Allowance STP Types
As part of STP Phase 2 allowances that are reported to the ATO for PAYG purposes now require to be processed with a specific type. If required this can be shown on the allowance by setting the PAYG Location field to Allowances and the STP Type dropdown will display.
From there simply select the required type from the list.
Please note that only a select few allowance types are required to be reported separately via STP and for advice as to whether your allowance needs to be reported in this fashion and if needed to what type you should select for the allowance, please refer to the ATO's documentation via the link below.
Employee Terminations Types
On preparing a termination for an employee, you now need to indicate the type to the ATO. This has been incorporated into the process using the Cessation Reason codes and is detailed in the Setting an Employees for Termination article.