FastTrack360 Version 12 Online Help
Overview of STP Phase 2
- Max Ciereszko
What is changing under STP Phase 2?
The process of submitting STP data to the ATO will not change. However, the data that is reported and the underlying structure of the data will change. Here is a snapshot of the differences:
Reporting of payroll information to Services Australia
Services Australia, which is responsible for delivering government payments to individuals, will receive data that is reported by employers through the STP Phase 2 channel along with the ATO.
This will improve information sharing between government agencies so that:
there is reduced need by government agencies to contact employers with requests for information pertaining to a current or former payee’s employment circumstances
there is greater visibility of individuals’ income to ensure that individuals are:
meeting their tax and social security obligations
are receiving entitlements that they are entitled to claim
are not accidentally or deliberately receiving entitlements to which they are not entitled.
Income stream and tax treatment codes replace payment summary type
STP Phase 2 uses an entirely new reporting structure that no longer relies on the concept of a payment summary type. Instead, an income stream type and tax treatment code is required to be reported to identify the types of payments that a payee receives and the tax treatment that is applied to the payee’s earnings respectively.
FastTrack360 will automatically report the relevant income stream type for each payee who is reported through STP based on how the Payee record is configured.
The table below lists the income stream types that will be supported in FastTrack360 and how the system will determine the relevant income stream type to report.Â
Income Stream Type | Description |
Salary and Wages (SAW) | This income stream applies where a payee is engaged as a direct employee of your business, and not an independent contractor (sole trader) or company contractor, and they are not working in Australia under any of the visas that qualify them as a Working Holiday Maker or Seasonal Worker Programme (for more information, see below). In FastTrack360 such payees are identified by:
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Labour Hire (LAB) | This income stream applies to payees who are engaged by a labour hire business as independent contractors (sole traders) and are not direct employees of the business. In FastTrack360 such payees are identified by:
This income type does not apply to payees who are company contractors (i.e. who work under the ABN of a company). Such payees are not subject to tax withholding, and are therefore not subject to STP reporting, unless they have a voluntary withholding agreement (for more information, see below). |
Working Holiday Maker (WHM) | This income type applies if the payee is working in Australia under one of the following visas and is engaged by a labour hire business as an employee:
In FastTrack360 such payees are identified by:
This income type does not apply if the payee is engaged by a labour hire business as an independent contractor (sole trader). Where that is the case, the payee should be set up as LAB (for more information, see above). |
Seasonal Worker Programme (SWP) | This income type applies if the payee has a Temporary Work (International Relations) subclass 403Â visa to work in Australia in the Seasonal Worker Programme (SWP) and is engaged by a labour hire business as an employee. In FastTrack360 such payees will be identified by:
This income type does not apply if the payee is engaged by a labour hire business as an independent contractor (sole trader). Where that is the case, the payee should be set up as LAB (for more information, see above). |
Voluntary Agreement (VOL) | This income type applies if the payee is a contractor who has entered into a voluntary agreement to have tax withheld from payments that they receive. In FastTrack360 such payees are identified by:
Note that a contractor can only have a voluntary withholding agreement if they are working under their own ABN (i.e. sole trader) as opposed to the ABN of a company. Under a labour hire arrangement, payments made to such payees would usually be reported under the Labour Hire income stream (see above for more information) and therefore the Voluntary Agreement income stream would generally not be applicable in a labour hire scenario. |
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The tax treatment code is a six-character code that identifies different aspects of the tax treatment that is being applied to a payee including: Â
category of tax scale that applies (e.g. regular, working holiday maker, foreign resident, variation, seasonal worker program, voluntary withholding)
options within the tax scale category (e.g. tax free threshold claimed/not claimed, tax offset claimed/not claimed)
if the payee has a Study and Training Support Loan (STSL) debt
if the payee is subject to a Medicare levy surcharge
if the payee is subject to a Medicare levy exemption
if the payee is subject to a Medicare levy reduction (aka Medicare levy adjustment in FT360).
FastTrack360 will be enhanced to automatically report the relevant ATO-defined tax treatment code via STP based on the options that are selected in the PAYG Tax Details section of the Payee record.
Note that enhancements will be made in the STP Phase 2 release to support seasonal worker program tax.
Disaggregation of gross earnings
STP Phase 2 introduces the concept of disaggregation of gross earnings, whereby some types of payments that were previously reported as part of a single aggregated gross earnings figure are reported as separate year-to-date amounts.
The benefit of disaggregation of gross is that it gives the ATO better visibility of the makeup of taxpayers’ earnings to ensure that they are being paid and taxed correctly and that individuals cannot hide earnings for the purposes of tax reduction.
Because STP Phase 2 data is also shared with Services Australia (SA), this also gives SA better visibility of earnings to prevent individuals receiving government benefits if they are not entitlement to and to ensure that individuals who are financially able to meet their social obligation payments, such as payment of child support, are meeting those obligations.
Disaggregation of gross applies to payees with a payee type/income type of Individual Non Business only. For all other income types, such as Labour Hire and Voluntary Withholding, all gross payments continue to be reported as a single, aggregated figure.
The table below lists and describes the categories into which gross earnings amounts, which were previously reported together as a single year-to-date gross value, are disaggregated under STP Phase 2 reporting.
Gross Category | Description |
Taxable allowances | Currently, some taxable allowances are required to be itemised separately from other gross earnings while some taxable allowances are included in the overall gross earnings amount. Under STP Phase 2, all taxable allowances are reported as separately itemised year-to-date amounts by allowance type. For more information, see Reporting of allowances under STP Phase 2. |
Bonuses and commission payments | Under STP Phase 2 bonus and commission payments are required to be reported as a separately itemised year-to-date amount. To enable disaggregated reporting of such payments, a Bonus/Commission Payments option has been added to pay code maintenance in FastTrack360 (for more information, see Pay Codes for Bonus/Commission Payments). On upgrading to STP Phase 2, payments made against pay codes where that flag has been set will automatically be reported as a separate year-to-date bonus and commission amount. |
Paid leave | Under STP Phase 2 payments for leave taken or cashed out during employment or at termination of employment must be reported as separate year-to-date amounts, itemised by specific leave type categories. The rules for how each type of paid leave must be reported depending on whether leave is paid when taken, when cashed out during service or when paid out at termination of employment are complex. For more information, see Reporting of paid leave under STP Phase 2. |
Salary sacrifice | Amounts deducted from payees’ gross earnings under a salary sacrifice arrangement must be reported as a separately itemised year-to-date amount by deduction type. FastTrack360 will automatically report gross deductions where the deduction type is Standard or Payee Super as separately itemised year-to-date amounts respectively. Note that the following deduction types are not included in the disaggregated salary sacrifice amount because they are reported elsewhere:
|
Overtime | Overtime payments must be reported separately to other gross payments under STP Phase 2. FastTrack360 will automatically report payments made against a pay code of Overtime under this category. Annual leave loading and TOIL leave that is cashed out during service against a pay code type of Overtime will also be automatically reported under this category. |
Other gross payments | Gross payments that do not fall into any of the abovementioned categories will be automatically reported as an aggregated year-to-date general gross payments amount. This amount is the pre-salary sacrifice gross amount. Note that this amount will exclude payments that are already reported separately in STP reporting, including employment termination payments (ETPs) and lump sum payments. |
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Updates to Tax File Number Declaration details
Currently, when a payee is reported through STP for the first time their Tax File Number (TFN) declaration details are automatically reported to the ATO, thereby negating the need for employers to lodge a separate TFN declaration report with the ATO to report new payees’ TFN declaration details. However, if a payee’s circumstances subsequently changed, any updates to the TFN declaration information were not updated to the ATO.
Under STP Phase 2, updates to a payee’s Tax File Number (TFN) declaration details will be recognized by the ATO, thereby negating the need for any separate reporting to the ATO should a payee’s circumstances change.
The ATO will derive the TFN declaration information, and any variations to that information, based on the tax treatment code that is reported (for more information, see Income stream and tax treatment codes replace payment summary type above). The exception to that is the employment start date and tax file number, which are reported separately to the tax treatment code.
Lump Sum E year
The prior financial year to which a Lump Sum E payment corresponds will be reported through STP so that it will no longer be necessary to issue Lump Sum E letters to payees at the end of a financial year to inform them of the prior year to which the payments correspond.
Payments that are made during a financial that qualify as Lump Sum E payments are already reported through STP. To support the requirement to report the corresponding prior financial year to which such payments correspond, FastTrack360 will be enhanced to automatically aggregate Lump Sum E payments by the corresponding prior financial year when an STP report is generated and submitted to the ATO.
Return to Work payments (Lump Sum W)
Return to work payments are payments to induce individuals to end industrial action or to entice an individual to leave another employer. Under STP Phase 2, such payments must be reported as a year-to-date Lump Sum W amount.
To support this, a Return to Work Payments option will be added to pay code maintenance in FastTrack360. If that option is enabled on a pay code, any payments made against that that code will be automatically reported as a Lump Sum W amount in STP reporting.
Working Holiday Maker Country
Due reciprocal tax arrangements with certain countries, some payees working in Australia under a Working Holiday Maker (WHM) visa may qualify as Australian residents for tax purposes and may therefore be eligible to be taxed at Australian tax resident rates.
Because of this, under STP Phase 2 it is necessary to report the country that issued the passport that a payee used to enter Australia if they are employed as WHM. That allows the ATO to determine if a WHM is eligible for a tax refund when the WHM completes their tax return.
To facilitate this, a Passport Country field has been added to WHM payee records in FastTrack360. For more information, see Working Holiday Maker Passport Country (AU Only) - FastTrack360 Online Help - Confluence (atlassian.net).
If a payee is working in Australia under a WHM visa, the employer is obligated to withhold tax from the payee’s earnings at WHM rates, irrespective of the payee’s country, unless the payee submits an ATO-approved Withholding Variation that stipulates a different rate of tax.
When will FastTrack360 be STP Phase 2 compliant?
FastTrack have been granted a vendor-level deferral by the ATO that covers all FastTrack clients until 31 December 2022. The deferral provides FastTrack clients additional time to prepare for STP Phase 2.
In June 2022 FastTrack will release a version of FastTrack360 that will feature enhancements that will allow you to start configuring your system in preparation for STP Phase 2. It is strongly recommended that you read the following topics to prepare for the release:
A further release in the second half of 2022 will provide further enhancements that are required to support STP Phase 2 and the STP Phase 2 compliant reporting capabilities. This is currently scheduled for late November 2022.
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