Changes to Single Touch Payroll (STP), FY 2021/22

Overview

The ATO rolled out changes to STP reporting in the 2021/22 financial year. The passing of this legislation was delayed due to COVID-19, but is now in effect when you report payroll data in Astute.

Note: This article contains general advice and recommendations relating to the configuration and EOFY processes in the Astute payroll system. It is not qualified tax or legal advice and should not be relied upon or used as such. 

If you have any questions relating to the correct configuration of the system for your business, you will need to contact a qualified adviser. 

Why is STP changing?

The Australian government is working to improve reporting capabilities and reduce the reporting burden placed on employers. In this phase, certain STP data is made available to additional government agencies, such as Services Australia (Centrelink) and the Child Support Agency.

As a result, the information required as part of your STP submission will be more granular and cross functional across the government agencies, with the intention of reducing the amount of separate reporting that needs to be completed (eg Separation Certificates, TFN Submissions, Child Support).

With agencies receiving this information in real time, those receiving government payments are less likely to be overpaid, resulting in less garnishee orders.

Key Changes

Child Support Garnishees and Child Support Deductions	The option to include the garnishees and deductions that the payer has been instructed to deduct from the payee by the Child Support Registrar will replace the need for the employer to provide separate remittance and deductions reports to the Child Support Registrar
Employment Separation Certificates	Reporting the type of cessation reason that ended the employment or engagement relationship between the employee and the employer will generally replace the need for payers to provide separate payee employment separation certificates to Services Australia
Tax File Number Declaration Forms	The current employment and withholding data for the payee must now be included in every pay event and will mean that a payer has met their obligation to send Tax File Number Declaration details to the ATO
Tax Treatment Codes	A new mandatory field must now be included in every pay event to indicate the PAYG tax scales and other components that have been applied by the payer to determine payee withholding amounts
Disaggregation of Gross	Remuneration is now to be reported as separately itemised components (Payment Types). Previously, it was rolled up and reported as either Gross Wages or Allowances.
Previous BMSID and YTD totals can be provided	There will now be an option to upload YTD totals into Astute from an old payroll system without overstating the employee’s earnings.  By entering a BMS ID for your old payroll system, the ATO will be alerted to the system change.

In the Astute system, you'll see configuration options for Pay Item, Deduction, and Superannuation to allow you to meet the STP reporting requirements.

Some considerations when you are configuring your items to be STP 2.0 compliant include:

• Setting up separate Annual Leave and Annual Leave on Termination pay items.
• Making sure that your leave categories are configured to use an Annual Leave pay item instead of a Base Hourly pay item.

For more information on a particular section in this article, please click the relevant link below:

• Changes to Pay Items and Redefining Gross Wages
• Changes to Deduction Configuration
• Changes to Termination Reasons

Redefining Gross Wages

A gross amount is required for each income type to be reported as a separate, itemised amount. This ensures that the data can be used across government departments where different definitions can be used to determine the amount of welfare benefits provided to recipients.

Payments are reported as YTD amounts and separated into the below categories: 

• Gross is the total of reportable income less the separately itemised components
• Paid Leave is reported separately and broken down into subcategories, to determine things such as Ordinary Time Earnings (OTE) and termination payment amounts for Services Australia
• Allowance Items are reported separately with additional subcategories
• Overtime
• Bonuses and Commissions
• Salary Sacrifice
• Lump Sum Payments
• Employment Termination Payments (ETPs)

Gross Payments

Whilst the traditional 'Gross Payments' are disaggregated for STP 2.0 into items such as paid leave, allowances, overtime, etc, many payments are included in gross, such as:

• Ordinary Hours
• Casual Loading
• Shift Penalties (where an employee is paid penalty rates for working the ordinary span of hours. This does not include overtime)
• Travel Time
• Training Time/TAFE hours
• Piece Rates
• Breach of rest break (Even though this is paid at overtime rates, it should be reported as gross. This may mean you need to set up separate pay items for overtime rates paid for breaks not taken)
• Workers Comp (Return to Work) where the employee is at work performing duties

Paid Leave 

The subcategories used to report Paid Leave are listed below:

Cash Payout	Leave entitlements that are cashed out in lieu of taking the leave Cash Payout leave types include: Annual Leave Leave Loading Long Service Leave Personal Leave Rostered Day Off (cash out of accrued RDOs in lieu of taking a day off)
Unused Leave on Termination	Leave that is paid out on termination including Annual Leave, Long Service Leave, as well as ETPs such as RDO, TOIL and Personal Leave that may be payable on termination
Paid Parental Leave	Salary and wages paid to an employee during paid parental leave (Employer) Government Paid Parental Leave
Workers Compensation Leave	Any Workers Compensation payments received by an employee for the hours not worked  This does not mean you need to set up a leave category for Workers Compensation (Not Worked). You can just categorise the pay item used to pay Workers Compensation separately.
Ancillary and Defence Leave	Paid leave for absences, eg: Australian Defence Force Emergency Leave Eligible Community Service Jury Duty
Other Paid Leave	All other paid absences, eg: Annual Leave Leave Loading Long Service Leave Personal Leave Rostered Day Off (RDO) Time Off in Lieu (TOIL) Compassionate and Bereavement Leave Study Leave Family and Domestic Violence Leave Special Paid Leave As per SGR 2009/2 S32, 33, part of S68 (paid workers’ compensation for work performed or attendance at work).

Allowance Items

The Allowance classifications align closely to Awards/Industrial Instruments and Service Australia (Centrelink) Classifications.

Car	A set rate for each kilometre travelled for business that represents the vehicle running costs, including:  registration fuel servicing insurance depreciation into account Should not include any cents per kilometre allowances that are paid for travel between the payee’s home and place of work unless it is a home-based business and the trip was for business purposes
Transport	As defined in s900-220 ITAA 1997, it is an allowance: included in an award in force on 29 October 1986  paid under an award that can be traced back to the 1986 award paid to cover transport expenses – these being the actual transport costs and not meals, accommodation or incidentals Refers to a fixed dollar amount per unit of time (such as per day, per week) to cover the cost of transport. This allowance is similar to c/km, except that the award transport payment measures time (per day or week) rather than distance travelled (per km) for the c/km allowance. It is an average measure of the cost over time
Laundry	An allowance for washing, drying and/or ironing uniforms required for performing work or services.  Typically paid as a regular rate for each week of work or services performed and cannot include dry cleaning expenses or reimbursements
Meals	An allowance defined in an industrial award or EBA that is in excess of the ATO reasonable allowances amount, paid to compensate the payee for meal breaks connected with overtime worked
Travel	An allowance that is in excess of the ATO reasonable allowances amount (for domestic travel), paid to compensate payees who are required to be absent overnight from their ordinary place of residence Not a reimbursement of actual expenses, but a reasonable estimate to cover costs including meals, accommodation and incidental expenses All overseas accommodation allowances are to be reported, without reference to ATO reasonable allowance amounts
Tools	Allowances to compensate a payee that is required to provide their own tools or equipment to perform work or services for the payer.  This allowance was formerly required to be reported under “Other Allowances” with a description of the allowance type but is now required to be reported separately
Tasks	Any allowance that is paid to a payee to compensate for specific tasks or activities performed that involve additional responsibilities, inconvenience or efforts above the base rate of pay.  Examples of tasks include: higher duties allowance confined spaces allowance dirty work height money This allowances were formerly included in the aggregated gross amount but is now required to be reported separately
Qualifications	Any allowance that is paid for to cover registration fees or maintain a recognised and authorised skill or qualification that is evidenced by a certificate, licence or similar  For example: first aid allowance (to pay for the qualification rather than being on standby to provide first aid in the workplace as in Tasks) electrician’s licence allowance dual certificate allowance firefighting allowance liquor licence
Other Allowances	Any allowances that are not otherwise separately itemised within the pay event that are intended to compensate the payee for an estimated expense but may not include actual reimbursement of expenses.  Examples of other allowances may include car allowances (other than cents per kilometre).

 

Overtime

In reporting Overtime separately, the ATO is able to distinguish these payments from Ordinary Time Earnings (OTE). 

SGR 2009/2 defines overtime payments in it’s amendments and sections 41-45.

Pay items which may be considered overtime include:

Overtime	Earnings which are not ordinary time earnings where an employee works extra time. This can include work done: Beyond their ordinary hours of work; Outside their agreed number of hours; or, Outside the spread of ordinary hours
Time Off in Lieu (TOIL)	TOIL is paid time off during the ordinary span of hours instead of being paid overtime pay. This should be categorised as Other Paid Leave (as above). However, if employees do not take this absence, they may request that the accrued time be paid out at the overtime rate. The cash out of TOIL in service should be reported as Overtime.
Call Back	Also known as recall allowances When an employee has left the workplace or completed their ordinary time without a prearranged agreement to work overtime, but is called back to work overtime
On Call	On call, standby or availability allowances to remain in readiness for a return to work
Commissions on Overtime	Commissions that are wholly referable to overtime hours worked.  Other commissions (ie referable to ordinary hours worked) should be reported as Bonuses and Commissions
Leave Loading in Lieu	Leave loading that is referable to a notional loss of opportunity to work overtime
Identifiable Overtime component of Annualised Salary	Annualised salary or wage amounts that have distinctly identifiable components within the outer limits that are expressly referable to overtime hours. This is only where the annualised salary is expressly stated as a sum of specific itemised components that includes an overtime component.
Hourly Driving Rates or Rates/km	Excess of total ordinary hours per period, or the stipulated overtime rate for piece-rate awards that include hourly driving rates and rates per kilometre
Overtime Bonuses	Payable in respect of overtime only
Part Time Additional Hours	Payable in accordance with industrial instruments that stipulate those additional hours are paid at a penalty or overtime rate that do not accrue leave entitlements
Excess Travelling Time	Payable at overtime rates for travel to an alternative place of work outside the ordinary span of hours

Bonuses and Commissions

Bonuses are usually made to an employee in recognition of performance or services and may not be related to a particular period of work performed.

Commissions are usually made to an employee is recognition or performance or services and may be calculated as a portion of the proceeds or volume of sales. 

The ATO uses the itemised reporting of Bonuses and Commissions to determine minimum obligations for OTE as defined in SGR 2009/2 sections 23,28,29,66,71

Directors Fees

Directors' fees include payments to the director of a company, or to a person who performs the duties of a director of the company. 

Directors' fees may include payment to cover travelling costs, costs associated with attending meetings, and other expenses incurred in the position of a company director.

Salary Sacrifice

From 1 January 2020, the law changed to ensure an individual’s salary sacrifice contributions cannot be used to reduce OTE or count towards an employer’s minimum superannuation guarantee contributions. 

Salary sacrifice can be reported as one of the following types:

Superannuation

An effective salary sacrifice arrangement, entered into before the work is performed, where contributions are paid to a complying fund, where the sacrificed salary is permanently foregone.  Considered to be an Additional Employer Contribution. For example, you may salary package an employee so they ‘Salary Sacrifice’ an extra 0.5% super, therefore you reduce their salary by 0.5% and add an additional 0.5% employer superannuation contribution. The new legislation means that you should be including that 0.5% in ordinary time earnings to calculate SGC.

Other Employee Benefits

An effective salary sacrifice arrangement, entered into before the work is performed, for benefits other than for superannuation, where the sacrificed salary is permanently foregone (eg cars, property, school fees etc)

Lump Sum Payments

The different lump sum codes are used to report amounts in different circumstances: 

Lump Sum A (R)	Unused annual leave or annual leave loading, and the component of long service leave that accrued from 16.08.1978 that is paid out on termination only for genuine redundancy, invalidity or early retirement scheme reasons
Lump Sum A (T)	Unused annual leave or annual leave loading that accrued before 17.08.1993, and long service leave accrued between 16.08.1978 and 17.08.1993, that is paid out on termination for reasons other than genuine redundancy, invalidity or early retirement scheme reason
Lump Sum B	5% of the payment for long service leave that accrued prior to 16/08/1978 that is paid out on termination, no matter the reason.  The remaining 95% of the LSL payment is not reportable or subject to PAYG
Lump Sum D	Represents the tax-free amount of only a genuine redundancy payment or early retirement scheme payment, up to the limit, based on the payee’s years of service
Lump Sum E	Represents the amount for back payment of remuneration that accrued more than 12 months before the date of payment and is greater than the lump sum E threshold amount
Return to Work Payment	A return to work amount is paid to induce a person to resume work, for example, to end industrial action or to leave another employer. It does not matter how the payments are described or paid, or by whom they are paid.  For example, an employee previously worked for IT Services Pty Ltd. Due to a shortage in IT personnel, IT Services Pty Ltd offered the employee a position if they would return to work for it. They were paid $18,000 to start work, in addition to their salary.

 

Employment Termination Payments

The Employment Termination Payment (ETP) reason code assigned to a payment will depend on the reason that the ETP is made:

R	If an ETP is paid because of: early retirement scheme genuine redundancy invalidity compensation for personal injury, unfair dismissal, harassment or discrimination
O	If an ETP is not described by R.For example, it was received because of:  golden handshake  gratuity  payment in lieu of notice*  payment for unused sick leave*  payment for unused rostered day off*  golden handshake*  gratuity*  *In some circumstances, these payments may be classified as excluded payments and subject to ETP cap only. The employer will need to categorise the payments as excluded or non-excluded based on the following factors:  the employment conditions, for example, what is reasonably required to be paid by the employer under the industrial agreement or employment contract for that termination type  what is paid as extra, discretionary or separate to what is reasonably required for that particular type of termination
S	If a code R ETP was paid in 2018-19 and the employee had received another ETP (code R or code O), or a transitional termination payment, in an earlier income year for the same termination of employment
P	If a code O ETP was paid in 2018-19 and the employee had received another ETP (code R or code O) or a transitional termination payment, in an earlier income year for the same termination of employment
D	If a death benefit ETP is paid and the payee is a death benefits dependant
B	If the payee received a death benefit ETP in 2018-19 and they were not a death benefits dependant and they received another death benefit ETP in an earlier income year for the same termination of employment
N	If the payee received a death benefit ETP and they were not a death benefits dependent, and code B or T does not apply
T	A death benefit payment directly to a trustee of the deceased estate. This person may be an executor or administrator who has been granted probate or letters of administration by a court.

Changes to Deduction Configuration

Child Support Deductions and Garnishees

Employers can report Child Support Deductions and Garnishees via STP. If you elect to do so, you will no longer need to report these to the Child Support Registrar separately. If you do not elect to report these via STP, you will still need to report the deductions and garnishees to the Child Support Registrar.

Fees Deductions

The ‘Fees’ deduction classification covers a number of different job related fee types, along with two Child Support Classifications. 

If you do end up reporting your Child Support Deductions via STP, you will need to ensure that you have assigned applicable categories to your existing deductions or create new deductions that cater to the different classification types.

If you’re not electing to submit this information via STP, you can set the STP Reporting Settings to ‘Not Applicable’.

Union Fees	This new category covers the following types of fees Union Fees Subscriptions to trade Business or Professional Associations the payment of a bargaining agent’s fee to a union for negotiations in relation to a new enterprise agreement award with the existing payer
Workplace Giving (Existing)	Workplace giving program donations to charities or organisations that are entitled to receive tax deductible donations
Child Support > Garnishee	A deduction made under a notice as per section 72A of the Child Support (Registration and Collection) Act 1988.  This is a percentage of an employee’s taxable gross income, a lump sum or a fixed amount each pay until the debt is satisfied.  A garnishee notice will include the total amount of child support owing and state that deductions are to be made under section 72A
Child Support > Deduction	A  deduction made under a notice as per section 45 of the Child Support (Registration and Collection) Act 1988.  This is a fixed dollar amount each pay period. The notice will advise of a start date for deductions and won’t include the total amount of child support owing.  Deductions made under section 45 of the Child Support (Registration and Collection) Act 1988 are made subject to a Protected Earnings Amount (PEA). This amount is updated on 1 January each year.
Reportable Super	Additional, optional (not legislated or mandated by industrial, legislative or business policy instruments) employer super contributions made on behalf of the employee, that have been influenced by the employee, such as for an effective salary sacrifice arrangement for super contributions to a complying super fund, amounts in excess of the maximum contribution base and other super co-contributions.

Changes to Termination Reasons

Termination classifications, along with the granular payment information, can tell Services Australia (Centrelink) the information they need to pay terminated employees the correct amount from the outset. The inclusion of STP classifications to Terminations Reasons means that Separation Certificates are not required.

Voluntary	An employee resignation, retirement, domestic or pressing necessity or abandonment of employment
Ill Health	An employee resignation due to medical condition that prevents the continuation of employment, such as for illness, ill-health, medical unfitness or total permanent disability
Deceased	The death of an employee
Redundancy	An employer-initiated termination of employment due to a genuine bona-fide redundancy or approved early retirement scheme
Dismissal	An employer-initiated termination of employment due to dismissal, inability to perform the required work, misconduct or inefficiency
Contract Cessation	The natural conclusion of a limited employment relationship due to contract/engagement duration or task completion, seasonal work completion, or to cease casuals that are no longer required
Transfer	The administrative arrangements performed to transfer employees across payroll systems, move them temporarily to another employer/entity, transfer of business, move them to outsourcing arrangements or other such technical activities.

Changes to Superannuation Configuration

Superannuation can be reported via STP 2.0 in two ways:

• Superannuation Liability - contribution payable by the employer as mandated by super guarantee legislation (10% super)
• Reportable Employer Superannuation Contributions - previously identified as 'Additional Employer Contributions. Additional and optional (not legislated or mandated by industrial, legislated, or business policy instruments) employer super contributions made on behalf of the employee that may have been influenced by an employee (eg salary sacrifice of an additional 1.5 to super)