Single Touch Payroll Phase 2: What’s Changed and What to Do Now

The ATO’s next major step in payroll reporting is here: Single Touch Payroll Phase 2 (STP2). While the name might sound like more of the same, there are some important differences every employer needs to understand.

Whether you run your own payroll or outsource it, here’s a quick overview of what’s changed, what it means for you, and how your software provider is handling the rollout.

So, what’s different in STP Phase 2?

While STP1 was mainly about reporting gross wages, tax, and super after each pay run, STP2 digs deeper. The ATO now requires more granular detail in your payroll reports, including:

• Disaggregation of gross income
  You now need to report components like bonuses, overtime, paid leave, and allowances separately instead of as one combined gross figure.
• More detailed income types
  Payments must now be classified into categories (e.g., salary and wages, closely held payees, labour hire, etc.). This helps the ATO pre-fill other income fields for employees.
• New reporting for termination and redundancy payments
  You must include the reason for employee terminations and report unused leave entitlements differently.
• Child support garnishees and deductions
  If you process child support deductions, these can now be included through STP rather than reported separately.

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What do you need to do?

1. Check if your software is STP2-compliant
   Most major payroll platforms (like Xero, MYOB, and QuickBooks) are gradually rolling out STP2 updates. You may need to map your pay items to the new ATO categories.
2. Update your employee records
   You may be asked to supply extra information such as employment type (full-time, casual), income type, and tax treatment codes.
3. Review your payroll setup
   This is a great time to clean up old pay items and ensure your chart of accounts and payroll settings are up to scratch.
4. Use deferral periods if needed
   The ATO granted many software companies (and their clients) a deferred compliance date—but don’t leave this too long. Your provider will let you know your exact cut-off date.

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How can I get help?

This transition can be smooth with the right guidance. I offer STP2 Payroll Reviews to help small business clients ensure their payroll settings are compliant and efficient, without the stress.

If you’d like help checking your setup or getting STP2-ready in Xero or MYOB, feel free to get in touch.