STP Phase 2

The fundamental basis of STP 2 is that more payroll data is being transmitted to more government departments who will rely on that data for their proper administration. Employee circumstances will be shaped by this data and employers are obligated to ensure its accuracy.  

In order to meet the challenge of transmitting correct payroll data there are two broad challenges for employers to overcome:

1. Payroll Software: The payroll software challenge will largely be addressed for you when your chosen payroll software supplier has been approved by the ATO to transmit STP 2 data. This means that your software will come pre-configured with the available labels and codes to operate STP 2. 

2. Payroll Skills: There are a range of skills required to properly operate STP 2 compliant payroll software. Firstly, there is a working knowledge of your chosen payroll software. Next, there is the bookkeeping and organizational skills to efficiently process a payroll. You also need a working knowledge of the available STP 2 labels and codes; and there are quite a lot of these available in a process the ATO call disaggregation. Finally, and most importantly, there is a payroll knowledge base (terminology, legislation, employer obligations etc) to properly select STP 2 labels and codes when processing payroll. 

A good analogy here is that the STP 2 compliant Payroll Software is your shiny new car and Payroll Skills is your license to properly operate it; you need both. 

The necessary payroll skill requires an understanding of what information is sought in each of the STP 2 labels. There are quite a lot of labels and codes that need to be correctly chosen from to properly process payroll under STP 2. Here is the list:

· Employment   Basis – 7 codes

· Cessation Type   – 7 codes

· Employment   Category – 10 codes

· Tax Treatment   – 9 codes

· Medicare   Surcharge – 3 tiers 

· Medicare   Levy Exemption/Reduction – 2 codes

· Study &   Training Support Loans – 2 codes

· Income   Stream Types – 10 choices

· Paid Leave   Types – 6 choices

· Allowance   types – 10 choices

· Salary   Sacrifice – 2 types

· Lump Sum – 6   types

· Eligible   Termination Payments – 8 types

· Deductions –   4 types

· Superannuation   Entitlements – 3 codes

· Reportable   Fringe Benefits – 2 types

Some of the options chosen in STP 2 payroll processing affect your employee’s Services Australia entitlements, Child Support Agency position or income tax outcome, so care needs to be exercised in understanding the different codes selected.