STP2 education series – Disaggregation of gross

STP reporting currently includes a gross amount. This is the total of many different components and payment types. Because some of these are treated differently for social security purposes, you will now need to report more detail.

In STP Phase 1, the gross amount you report contains different types of amounts depending on the particular income type. This approach has changed in STP Phase 2 and all payment types are now reported consistently for each income type.

Instead of reporting a single gross amount, you will now separately report:

• gross
• paid leave
• allowances
• overtime
• bonuses and commissions
• directors’ fees
• lump sum W
• salary sacrifice

Rules for reporting amounts

Your STP report includes YTD amounts of salary or wages, allowances or other payments (as relevant), deductions and PAYG withholding for each employee included in that pay event.

These YTD amounts may be less than a previous report (for example, recovery of a current year overpayment) or can be zero.

There are limited circumstances where YTD amounts for specific payment types are negative, typically where corrections cross financial years (such as refunds of salary sacrifice) or cross related payers. This can result in some of the YTD amounts you need to report through STP also being negative.

If this occurs, YTD amounts can be negative when they are reported for:

• gross
• paid leave
• allowances
• overtime
• bonuses and commissions
• directors’ fees
• lump sum type W
• salary sacrifice

If any of the YTD amounts you report are negative, the overall amount of income for each income type you report in your STP report must still be zero or positive. This means that for each income type the total of Gross, Paid leave, Allowances, Overtime, Bonuses and commissions, Directors’ fees and Lump sum W, less salary sacrifice, must be zero or positive. Your solution will ensure you meet this requirement.

Not all amounts can be reported for all income types. The following table shows the amounts that can be reported against each income type.

Income Types

Each amount you pay to an employee will now be assigned to an income type, and you can report amounts assigned to multiple income types throughout the year.

Income types that you can assign payments to are:

• SAW (salary and wages) – this is the most common income type and was formerly known as individual non-business (INB)
• CHP (closely held payees) – applies when the payee is directly related to the employer, such as family members. If you are using the concessions available to closely held payees, you must report these payments under this income type. This type of income was formerly included in SAW.
• WHM (working holiday makers) – applies to temporary visitors to Australia who hold a Working Holiday visa (subclass 417) or Work and Holiday visa (subclass 462).
• FEI (foreign employment income) – applies to assessable income paid to payees (who are Australian tax residents) that is subject to tax in another country for work performed in that country, if the qualification period is met. There are rules for reporting Foreign Employment Income.
• IAA (inbound assignees to Australia) – some multinational payers exchange, or transfer, payees between affiliated entities in different tax jurisdictions. If you are using the concessions available to inbound assignees to Australia, you must report these payments under this income type. This type of income was formerly included in SAW.
• SWP (seasonal worker programme) – applies to regional programmes for government-approved employers, administered by the Department of Employment, Skills, Small and Family Business. This type of income was formerly included in SAW. This does not include workers under the Pacific Labour Scheme which are recorded as SAW.
• JPD (joint petroleum development area) – before 1 July 2020 only.
• VOL (voluntary agreement) – applies to contractors paid under a Voluntary agreement.
• LAB (labour-hire) – applies to payments by a business that arranges for persons to perform work or services, or performances, directly for clients of the entity. Income for contractors only – does not include employees. Employees of labour-hire firms should be reported as the relevant income type, such as SAW.
• OSP (other specified payments) – this is a limited income type that only applies to specified payments by regulation 27 of the Taxation Administration Regulations 2017.

Reporting available by income types

What is in Gross

All remuneration you pay to employees that is reportable through STP, and is not separately itemised, should be reported as gross.

Only pre-sacrifice amounts that are classified as ordinary time earnings (OTE) should be included as gross.

If you are making a back payment or arrears payment, it may be included as gross.

Include as gross:

• Ordinary hours worked
• Casual loading
• Shift penalties (including public holiday penalties)
• Workers compensation payments for employees at work performing duties
• Piece rates for work done during ordinary hours
• Daily rates for employee compensated using a flat daily rate
• Flexi time
• Breach of rest break payments when an employee doesn’t get an appropriate break between shifts
• Time for travel or training paid within the span of ordinary hours
• Charge rates for work performed, outcomes achieved or targets met by contractors

Do not include as gross

• Rostered days off (time taken) paid at ordinary rates (this payment must be reported as Paid Leave type O)
• Time off in lieu taken and paid at ordinary rates (this payment must be reported as Paid Leave type O)
• The following payments which are now reported separately. Paid leave, allowances, overtime, bonuses and commissions, directors’ fees, lump sum W, salary sacrifice.

Paid leave

You now need to separately report the following leave payments made to your employees in your STP Phase 2 report:

• other paid leave (paid leave type O)
• paid parental leave (paid leave type P)
• workers’ compensation (paid leave type W)
• ancillary and defence leave (paid leave type A)
• cash out of leave in service (paid leave type C)
• unused leave on termination (paid leave type U)

You don’t need to report unpaid leave through STP as there is no payment to report.

Overtime

You need to report overtime amounts paid to employees.

It can include work done:

• beyond their ordinary hours of work
• outside the agreed number of hours
• outside the spread of ordinary hours (the times of the day ordinary hours can be worked).
• Only pre-sacrifice amounts that are not classified as OTE according to the SGAA should be included as overtime

If you are making a back payment or arrears payment, it may be included as overtime.

Bonuses and commissions

You may pay bonus and commission payments to reward employee performance or service. These are typically paid as a lump sum.

Only pre-sacrifice amounts that are classified as OTE should be included as bonuses and commissions.

If you are making a back payment or arrears payment, it may be included as bonuses and commissions.

Directors’ fees

If you pay directors’ fees you must separately include these in your STP Phase 2 report.

Directors’ fees include payments to:

• the director of a company
• a person who performs the duties of a director of the company
• a member of the committee of management of the company, or as a person who performs the duties of such a member if the company is not incorporated.
• Directors’ fees may include payment to cover travelling costs, costs associated with attending meetings and other expenses incurred in the position of a company director.

Only pre-sacrifice amounts that are classified as OTE should be included as directors’ fees.

If you are making a back payment or arrears payment, it may be included as directors’ fees.

Lump sum W (return to work payment)

A return to work amount is paid to induce an employee to resume work. For example, to end industrial action or to return from working for another employer. This is a new category of lump sum payments which is being introduced as part of STP Phase 2. Previously, they were reported as gross and not separately identified.

Only pre-sacrifice amounts that are classified as OTE should be included as lump sum W.

If you are making a back payment or arrears payment, it may be included as lump sum W.

Allowances

In Phase 1 reporting, some allowances are reported separately, and some are reported as part of Gross.

You will now need to report all allowances separately in your STP Phase 2 report across most income types, not just expense allowances that may have been deductible on your employee’s individual tax return. This means that allowances previously reported as gross must now be separately itemised and reported.

Don’t report:

• reimbursements
• fringe benefits

The allowance types you will separately report in STP Phase 2 are:

• cents per km (allowance type CD)
• award transport payments (allowance type AD)
• laundry (allowance type LD)
• overtime meal allowance (allowance type MD)
• domestic or overseas travel (allowance type RD)
• tool allowances (allowance type TD)
• qualification and certification allowances (allowance type QN)
• task allowances (allowance type KN)
• other allowances (allowance type OD)

Back pays

Sometimes you need to make a back payment to an employee. In some cases, this may be a lump sum E payment.

If you are making a back payment to an employee and it is not lump sum E, then report it in STP as the relevant payment type (such as gross or overtime).

Your payroll solution may report Lump sum E:

• in each STP report, or
• only when you finalise your reporting at the end of the financial year.
• Both ways are acceptable.

You must report Lump sum E YTD amounts by specifying each prior financial year to which the amount relates.

When you report lump sum E payments, you will no longer need to issue employees with a lump sum E letter at the end of the financial year. This information will now be available on their income statement.

Salary sacrifice

You must separately report salary sacrificed amounts.

When reporting salary sacrificed amounts, there are 2 new types to report:

• super (salary sacrifice type S) – for super to a complying fund or retirement savings account (RSA)
• other employee benefits (salary sacrifice type O) – for benefits other than super.

If your employee has an effective salary sacrifice arrangement, you have previously reported post-sacrifice amounts to us. This changes as part of STP Phase 2. You now to need to report the salary sacrifice amounts and separately report the pre-sacrificed income amounts in your STP report.

You must not report amounts sacrificed from exempt foreign employment income as salary sacrifice in your STP report.

Tax that has been withheld or paid

The kinds of payments you need to report are also payments which are part of the PAYG withholding system. This means you are required to withhold amounts from these payments and pay the amount you have withheld to us. In some cases, you may also need to pay tax to a foreign government or tax authority. You need to include these amounts.

PAYG withholding

You must report the amounts you withhold from payments you make to employees. You must include separate YTD amounts you have withheld from each income type (and for income types that require a country code, for each combination of income type and country code).

If you are reporting amounts you have withheld from payments you are reporting against the FEI income type, you must only report the residual amount withheld after the deduction of foreign tax paid. If you do not know the amount of foreign tax on or before each payday, you must report the full amount of PAYG withholding. When you know the amount of foreign tax you can correct your STP reporting so that you are reporting the residual amount.

Foreign tax paid

If you have paid amounts to an employee that you are reporting against the FEI income type, there are rules for reporting foreign employment income. One of these rules is that you must report the amount of foreign tax that you have paid or are required to pay to a foreign government or authority.

This amount must be included in your STP reporting during the same financial year as the payment is reported even if you do not actually pay the foreign tax until after the end of the Australian financial year.

The amount you report must be in Australian dollars.

If you do not know the amount of foreign tax on or before each payday, then you can report zero or estimate the amount of foreign tax. If you do this, you must still include the correct foreign tax amount in your STP report when you finalise your reporting at the end of the financial year.

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