The ATO will be making changes to how STP is reported in the 2020/21 financial year. While the passing of this legislation has been delayed due to COVID-19, you can start to think about changes you may need to make and prepare your portal now for a smoother transition later in the financial year.
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 initial phase, certain STP data will be 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||
While the new options won’t be included in your STP data until the new STP format is in use later in the financial year, it’s a good idea to look at your current configuration to identify where you may need to set up new pay items for the new financial year which align with the new reporting requirements. Some examples 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
The changes to STP will require a gross amount 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 will still be reported as YTD amounts and will be separated into the below categories:
- Gross will report the total of reportable income less the separately itemised components
- Paid Leave will be 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
- Community Development Employment Programme (CDEP)
- Salary Sacrifice
- Lump Sum Payments
- Employment Termination Payments (ETPs)
The additional subcategories that will be used to report Paid Leave are listed below:
|Unused Leave on Termination||
|Paid Parental Leave||
|Ancillary and Defence Leave||
|Other Paid Leave||
The additional Allowance classifications being added align more closely to Awards/Industrial Instruments and Service Australia (Centrelink) Classifications.
|Cents Per KM||
|Award Transport Payments||
|Overtime Meal Allowances||
|Domestic or Overseas Travel Allowances and Overseas Accommodation Allowances||
|Qualifications and Certificates||
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.
Bonuses and Commissions
Again, the ATO will be using 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
As per SGR 2009/2 and its amendments, section 40 defines directors’ fees. All fees, including retainer fees and meetings fees, as compensation for serving on the board of directors.
Community Development Employment Program (CDEP)
There is no change to how CDEP is reported for STP. It will continue to be reported as separate earnings.
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
When the changes to STP come into effect, there will be an opportunity for Employers to 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 ATO will be introducing a new ‘Fees’ deduction classification that will cover 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 assign applicable categories to your existing deductions or create new deductions to cater for 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
We’re adding STP classifications to Termination Reasons. When the STP changes come into effect later in the year, Separation Certificates will become a thing of the past.
Termination classifications, along with the granular payment information, can tell Services Australia (Centrelink) all they need to know to ensure they pay terminated employees the correct amount from the outset.
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.