How to transition
The way you transition from STP Phase 1 to STP Phase 2 reporting will depend on your circumstances and the solution you use.
You should follow your DSP's instructions to upgrade your solution. Your DSP will tell you if you need to take any other steps, such as re-mapping pay codes.
If transitioning to STP Phase 2 reporting means you also need to change your payroll solution, see Changing your payroll solution or employees’ Payroll IDs.
Find out about how to report employment and taxation information through STP Phase 2.
If full YTD data is not available
As you report YTD information through STP, it means you need to have relevant data available from the start of the financial year in order to report in the new STP Phase 2 format.
We understand that there are circumstances which mean it won't be possible for some employers to have all this data available if they are transitioning to STP Phase 2 in the middle of a financial year. In this situation we don't expect you to create that data by reprocessing your payroll or creating new STP reports for periods you have already correctly reported using STP Phase 1.
We have introduced 2 concessional methods to assist employers in this situation transition to STP Phase 2 reporting:
You should seek your DSP's advice and follow their instructions about:
- whether these methods are appropriate to use with your payroll solution
- how to implement these methods within your payroll solution.
You can only use these methods in the financial year that you transition from STP Phase 1 to STP Phase 2.
Hybrid disaggregate method
In STP Phase 1, you reported a single gross amount which was made up of several different payment types. In STP Phase 2, many of these need to be separately reported.
Using this method, you do not need to separate the gross amount already reported through STP Phase 1 into its STP Phase 2 disaggregated components. This means that, for the remainder of the financial year when you transition, your STP reporting is a hybrid between STP Phase 1 and STP Phase 2.
However, amounts relating to pay dates after you transition to STP Phase 2 must be correctly reported using STP Phase 2. This means that where amounts need to be separately reported or reported in a different way detailed in these guidelines, you must do so.
If you choose to use this method, you must:
- ensure your STP Phase 1 reporting is complete and that you have made any corrections that are required
- assign your STP Phase 1 gross amount to the most appropriate income type (and if required for that income type, the most appropriate country code) in your STP Phase 2 reporting
- assign any allowances that are separately identified in STP Phase 1 to the most appropriate equivalent in STP Phase 2 (if you cannot fully disaggregate them)
- ensure that you have set up your payroll solution so that you are reporting correctly in STP Phase 2 moving forward.
Example: hybrid disaggregate method
John employs one staff member to work in his shop. The staff member earns ordinary salary and wages, and sometimes works overtime.
In STP Phase 1 reporting, John did not need to separately identify what was ordinary salary and wages and what was overtime. To meet his STP Phase 1 reporting requirements, John stored only the information that was needed for the STP Phase 1 report – gross pay.
For the period 1 July to 31 December 2021, John has paid his staff member $26,000, consisting of:
- $23,000 of ordinary salary and wages
- $3,000 of overtime.
John has correctly reported $26,000 as the gross YTD amount in his STP Phase 1 report.
John transitions to STP Phase 2 reporting on 1 January 2022. STP Phase 2 reporting requires separate reporting of ordinary salary and wages (gross) and overtime. John changes the way he captures his payroll information so that both are available for his STP Phase 2 reporting. However, he isn't able to retrospectively separate the $26,000 he has already reported through STP Phase 1 into its components.
John chooses to use the hybrid disaggregate method to transition to STP Phase 2 reporting.
For the period 1 January to 30 June 2022, John has paid his staff member $24,000, consisting of:
- $23,000 of ordinary salary and wages
- $1,000 of overtime.
John correctly reports these components in his STP Phase 2 report.
At the end of the year, John's employee has one income statement available for their tax return, which shows for the salary and wages (SAW) income type:
- Gross $49,000 (which is made up of $26,000 John reported through STP Phase 1 and $23,000 he reported through STP Phase 2).
- Overtime $1,000 (which is the overtime John reported through STP Phase 2).
Replacing Payroll IDs method
Your payroll solution will generate your STP report for your pay cycle by ABN, branch and BMS ID. We use this combination of information, together with the Payroll IDs you report, to identify when we need to display a separate income statement to your employees. We will display a separate income statement for each combination.
This means changing the Payroll IDs for your employees is a way to separately finalise your STP Phase 1 reporting and restart from zero using STP Phase 2 because a separate income statement will be displayed for each.
Before deciding to use this method, you should consider whether it is appropriate for your circumstances. Factors which may influence this include:
- how many employees you need to change the Payroll ID for, and the work needed for you to do this in your payroll solution
- whether it may cause you to exceed the limits of your payroll solution's subscription, plan or pricing tier
- whether the Payroll ID is used elsewhere in your business that may result in adverse consequences if it is changed.
If you choose to use this method to transition to STP Phase 2, you must:
- ensure your STP Phase 1 reporting is complete and that you have made any corrections that are required
- finalise your STP Phase 1 reporting for each employee
- follow your DSP's instructions for
- upgrading your payroll solution to enable STP Phase 2 reporting
- changing your employees' Payroll IDs within your solution.
Example: replacing Payroll IDs method
Tracey employs one staff member to work in her shop. They are recorded in her payroll system with the Payroll ID 1234. They earn ordinary salary and wages, and sometimes work overtime.
Tracey didn't need to separately identify what was ordinary salary and wages and what was overtime in her STP Phase 1 reporting. To meet her STP Phase 1 reporting requirements, she captured only the information that was needed – gross pay.
For the period 1 July to 31 December 2021, Tracey has paid her staff member $26,000, consisting of:
- $23,000 of ordinary salary and wages
- $3,000 of overtime.
Tracey has correctly reported $26,000 as the YTD amount in her STP Phase 1 report at the label Gross.
On 1 January 2022, Tracey makes sure her STP reporting is complete and finalises her STP Phase 1 reporting for her employee.
Later that same day, Tracey transitions to STP Phase 2 reporting by following her DSP's instructions for upgrading to a new version of her payroll solution. She changes her employee’s Payroll ID to 1235.
For the period 1 January to 30 June 2022, Tracey pays her staff member $24,000, consisting of:
- $23,000 of ordinary salary and wages
- $1,000 of overtime.
At the end of the year, Tracey's employee has 2 income statements available for their tax return:
- One income statement from STP Phase 1 for Payroll ID 1234 covering the period from 1 July to 31 December, showing
- Gross $26,000.
- One income statement from STP Phase 2 for Payroll ID 1235 covering the period from 1 January to 30 June, showing
- Gross $23,000
- Overtime $1,000.