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.
|Child Support Garnishees and Child Support Deductions||
|Employment Separation Certificates||
|Tax File Number Declaration Forms||
|Tax Treatment Codes||
|Disaggregation of Gross||
|Previous BMSID and YTD totals can be provided||
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
- Bonuses and Commissions
- Salary Sacrifice
- Lump Sum Payments
- Employment Termination Payments (ETPs)
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
The subcategories used to report Paid Leave are listed below:
|Unused Leave on Termination||
|Paid Parental Leave||
|Workers Compensation Leave||
|Ancillary and Defence Leave||
|Other Paid Leave||
The Allowance classifications align closely to Awards/Industrial Instruments and Service Australia (Centrelink) Classifications.
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:
|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.
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 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.
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:
|Other Employee Benefits||
Lump Sum Payments
The different lump sum codes are used to report amounts in different circumstances:
|Lump Sum A (R)||
|Lump Sum A (T)||
|Lump Sum B||
|Lump Sum D||
|Lump Sum E||
|Return to Work Payment||
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:
|O||If an ETP is not described by R.For example, it was received because of:
*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:
|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.
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’.
This new category covers the following types of fees
|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.
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.
An employee resignation, retirement, domestic or pressing necessity or abandonment of employment
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
The death of an employee
An employer-initiated termination of employment due to a genuine bona-fide redundancy or approved early retirement scheme
An employer-initiated termination of employment due to dismissal, inability to perform the required work, misconduct or inefficiency
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
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)