The ATO has released important updates to Single Touch Payroll Phase 2 reporting requirements. Understand what has changed, how it affects your business, and what you need to do to remain compliant.
Single Touch Payroll (STP) Phase 2 is an enhancement to the original STP system that requires employers to report more detailed information about their employees' pay, tax, and super to the ATO each time they run payroll.
STP Phase 2 provides the ATO with more granular data to help employees access government services more easily, improve compliance, and reduce the need for payment summaries (formerly known as group certificates).
The ATO now requires more detailed categorisation of income types to help determine employee eligibility for government benefits and services. You must now separately report:
You must now clearly identify the employment basis for each employee using one of these categories:
If you have employees working overseas or Australian residents working for foreign employers, you must now report the country where the work is performed using ISO 3166-1 alpha-3 country codes (e.g., AUS for Australia, NZL for New Zealand, USA for United States).
Enhanced reporting for child support deductions now requires:
When an employee leaves your business, you must report their cessation date through STP. This helps the ATO and Services Australia determine when an employee may be eligible for government payments or services.
All employers who report through STP must transition to STP Phase 2. This includes:
To ensure compliance with STP Phase 2, follow these steps:
Ensure you are using STP Phase 2 compliant software. Exacc is fully compliant with all STP Phase 2 requirements and automatically includes the latest ATO updates.
Check that all employees are correctly classified by employment basis (full-time, part-time, casual, labour hire, or other).
Configure your payroll to correctly categorise different income types (salary, allowances, bonuses, etc.) according to ATO requirements.
If you have employees working overseas, add the correct country code to their employment records.
Ensure child support customer reference numbers are correct and deductions are properly categorised as ongoing or arrears.
Run a test STP submission to ensure all data is being reported correctly and accepted by the ATO.
Cause: Employee classification is missing or uses an invalid code.
Solution: Review each employee record and assign one of the five valid employment basis codes: full-time, part-time, casual, labour hire, or other.
Cause: Total gross reported without breaking down into specific income types.
Solution: Configure pay items to automatically categorise income into the correct type (salary, allowances, bonuses, etc.).
Cause: Country code format is incorrect or uses an invalid code.
Solution: Use ISO 3166-1 alpha-3 country codes (three-letter codes like AUS, NZL, GBR).
Cause: Child support deduction reported without required customer reference number.
Solution: Obtain the customer reference number from the Services Australia deduction notice and add it to the employee record.
Exacc is fully compliant with all STP Phase 2 requirements and automatically handles:
Our support team can help you configure Exacc to meet all STP Phase 2 requirements and ensure seamless compliance.
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