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Understanding the single touch payroll requirements

The Single Touch Payroll (STP) system has changed the way that employers report taxation information to the Australian Taxation Office (ATO). This includes wages, salaries, superannuation and even allowances.

What is single touch payroll?

STP requires employers to report payroll information - including salaries and wages, PAYG withholding and superannuation - to the ATO each time employees are paid.

STP reduces the reporting burden for employers who need to report information about their employees to multiple Government agencies. It may also help employees who are Service Australia customers receive their correct payments on time.

Do I need to use the STP system?

Yes. All businesses should now be using the STP system, which includes Phase 2. If you have not started reporting through STP, you must start reporting as soon as possible as penalties may apply.

What do I need to report?

When reporting, employers should have the following information available:

  • Employee TFN or ABN for each payee
  • Commencement date for each payee  
  • Employment basis
  • Tax treatment

Find out more about how to report.

STP Phase 2 changed the way payments need to be reported. There are several categories of income types that are used, including SAW (salary and wages) and LAB (labour hire).

Employers are required to separately report:

  • Gross income
  • Paid leave
  • Allowances
  • Overtime
  • Bonuses and commissions
  • Directors’ fees
  • Lump sum W (return to work payment)
  • Salary sacrifice 

It is important to note that there are some things that should not be included in the gross income, including rostered days off paid at ordinary rates which should be reporting as Paid leave type O (other paid leave).

What allowances do I need to report?

If you have employees under the modern awards, it is likely that they are paid allowances. Under Phase 2, to work out how to report allowances, you should follow these steps:

Identify whether the amount is a reportable allowance

Generally, allowances are reportable, but to ensure that the amount needs to be reported, there are certain questions employers should answer to work out whether an amount is reportable:

  • Are you paying an amount to your employee?

If you are not paying an amount, there is nothing to report. However, if you are providing a fringe benefit, you may need to include reportable fringe benefits in your report.

  • Is the amount you are paying reimbursing an expense supported by receipts?

Reimbursements are not reportable.

  • Is the amount you’re paying a living away from home allowance fringe benefit?

A living away from home allowance (LAFHA) is a fringe benefit. It is an amount you pay your employee to compensate them for any additional expenses incurred, or disadvantages they may suffer, as a result of their duties of employment requiring them to live away from their normal residence.

If you are paying an amount for LAFHA, these are not reportable allowances. However, under some awards this may be a travel allowance, so it is important to understand which one you are paying.

Find out more about Living-away-from-home allowance.

Identify whether the allowance needs to be disaggregated

Employers must report allowances separately, unless one of the below exceptions applies.

An allowance does not need to be disaggregated if:

  • The allowance forms part of an amount reported as overtime; or
  • The employee is being paid cash out of leave in service (Type C) or unused leave on termination (Type U).

Do I need to report the all-purpose allowance?

Many awards, including the Building and Construction General On-site Award, include allowances that are added to an employee’s hourly rate. This is paid for all purposes, such as leave and overtime. Under Phase 2, you must report these allowance amounts separately.

For example, under the Building Award, a carpenter working in the residential industry is paid a total of $1080.08 weekly, which includes:

  • $37.32 for tools and protective or other clothing or equipment allowance
  • $47.76 for residential industry allowance

Employers are required to report these amounts separately. These amounts are identified in HIA’s wage sheets. 

To find out more on how to report allowance, see the ATO website.

To find out more, contact HIA's Contracts and Compliance team

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