STP Phase 2

STP Phase 1 gave the ATO more visibility over how and what businesses paid their employees. The expansion of Single Touch Payroll (STP), also known as STP Phase 2, helps employers capture employee's tax and super reporting obligations to multiple government agencies for ATO compliance. It also helps employees get the right payment at the right time. The required start date for STP Phase 2 reporting is 1 January 2022.

STP Phase 2 upgrades in Dayforce include the following:

• Turn on the STP Phase 2 option
• STP Phase 2 Data Migration background job
• Enter the previous Business Management Software (BMS) ID
• Enter the tax treatment code
• STP PAYEVENT mapping in Dayforce
• View STP Phase 2 information
• Support for all income stream types in STP Phase 2

Enable the STP Phase 2 Option

To switch from STP Phase 1 to Phase 2, turn on this option by selecting the Enable STP Phase 2 checkbox in the Payroll section of the Properties tab in System Admin > Client Properties. See Client Properties - Payroll in the Dayforce Implementation Guide.

STP Phase 2 Data Migration Background Job

Payroll administrators can run the STP Phase 2 Data Migration background job only once to update the income stream type and populate tax treatment codes for all employees. Run the STP Phase 2 Data Migration background in the Available Jobs tab of System Admin > Background Jobs.

Enter Tax Treatment Codes

Previously, employee tax information was part of the tax file number declaration. Phase 2 introduces a six-character tax treatment code to indicate what PAYG tax scales and other components apply to the employee to determine the withholding amount. Dayforce automates the reporting of these tax treatment codes and makes sure that the tax treatment code you report is valid. The following categories of tax treatment codes support validation rules for STP reporting:

• Regular
• Working Holiday Maker
• No TFN
• ATO-Defined
• Foreign resident
• Seasonal Worker Programmed (SWP)
• Voluntary Agreement (VOL)

In Dayforce, the employee tax treatment codes for STP reporting are supported through the Tax Treatment Code field in the Federal Tax Info section of the Payroll > Tax Definitions screen in People. You must include this required field in every pay event to indicate the PAYGW tax scales and other components that the payer applies to determine payee withholding amounts. Click the Info icon to view a table that includes the following tax treatment codes:

• Category (Character 1)
• Tax Option (Character 2)
• Study and Training Support Loan (Character 3)
• Medicare Levy Surcharge (Character 4)
• Medicare Levy Exemption
• Medicare Levy Reduction

Tax treatment validation rules per category

Category	Tax Option	Study and Training Support Loan	Medicare Levy Surcharge	Medicare Levy Exemption	Medicare Levy Reduction	Treatment Code
R – Regular	T – With tax-free threshold, D – Daily casuals N – With no tax-free threshold	S – Has STSL X – No STSL	# – Tier (1, 2 or 3 to be supplied) X – No surcharge	H – Half F – Full X – No exemption	0 – Spouse only # – Dependants (number from 1 and 9, A if 10 or more) A – 10 or more dependants X – No reduction	Click the Info icon
H – Working Holiday Maker	R – Registered employer U – Unregistered employer F – Foreign resident no TFN	X – No STSL	X – No surcharge	X – No exemption	X – No reduction	Click the Info icon
N – No TFN	F – Foreign resident A – Australian resident	X – No STSL	X – No surcharge	X – No exemption	X – No reduction	Click the Info icon
D – ATO Defined	B – Death Beneficiary V – Downward Variation Z - Non-Employee	X – No STSL	X – No surcharge	X – No exemption	X – No reduction	Click the Info icon
F – Foreign Resident	F – Foreign Resident	S- has STSL X – No STSL	X – No surcharge	X – No exemption	X – No reduction	Click the Info icon
W – Seasonal Worker Programme	P - Seasonal Worker Programme	X – No STSL	X – No surcharge	X – No exemption	X – No reduction	For tax option P: WPXXXX
V – Voluntary Agreement	C – With Commissioner’s installment rate (CIR) O – Without Commissioner’s installment rate (CIR)	X – No STSL	X – No surcharge	X – No exemption	X – No reduction	For tax option C: VCXXXX For tax option O: VOXXXX

The Tax Treatment Code field is auto populated and payroll administrators can edit this field as required. Upon saving, Dayforce validates the tax treatment codes. Any change to the system calculated tax treatment codes prompts a warning message but still lets you save the code. If the tax treatment code isn’t in the list of valid tax treatment codes, an error message shows and you can’t proceed until you change it to a valid code. Note the following:

• The Medicare Levy Surcharge (fourth character) in the tax treatment is defaulted to "X" for all employees because Dayforce currently doesn’t have information on employee tiers. You can change the character accordingly where required. # – Tiers 1, 2 or 3 are accepted characters.
• When an employee is a working holiday maker, Tax Option (second character) is defaulted to R – Registered employer. You can change it to U – Unregistered employer, F – Foreign resident no TFN where required.
• If an employee falls into a death beneficiary category, the tax treatment code is updated manually based on the table of tax treatment codes.

STP PAYEVNT Mapping

PAYEVNT is a summary report that helps employers inform ATO about the payments made to their employees. In STP Phase 2, ATO requests the disaggregation of gross income. This change means that various earnings and deductions are reported separately to the ATO payevent file. Using an earning and deduction mapping user interface in Dayforce, payroll administrators can map a specific earning or deduction to its respective PAYEVNT category and PAYEVNT code drop-down list fields in Payroll Setup > Earnings and Deductions. This mapping is critical for STP reporting. Without mapping, the STP file reports everything incorrectly under the gross amount.

Payroll administrators can add or change STP mapping for every pay run as required. The STP file picks up the latest mapping when committing payroll. Any lump sum, termination payment, superannuation, and superannuation salary sacrifice aren’t available in the PAYEVNT category drop-down list for mapping as these events are handled using tax and compliance types.

STP PAYEVNT mapping categories and codes

Category	Description	PAYEVNT Code
Allowances-PAYEVNTEMP226	Allowances that are reported in STP. In STP Phase 2, allowances formerly reported as gross for the income type are now itemised separately as specific allowance types for each individual nonbusiness income type. All allowances must be separately itemised, including expense allowances that are deductible on the employee’s individual income tax returns. Note: When you select the PAYEVNTEMP226-Allowance items option in the PAYEVNT category drop-down list with the OD-Other Allowances option in the PAYEVNT Code drop-down list, select the type of allowance in the Other Allowance Type drop-down list.	The separately itemised allowances include the following types: CD (Cents per Kilometer) AD (Award Transport Payments) LD (Laundry) MD (Overtime Meal Allowances) RD (Domestic or Overseas Travel Allowances and Overseas Accommodation) TD (Tool Allowances) OD (Other Allowances) KN (Tasks) QN (Qualifications/Certificates)	PAYEVNTEMP226
Bonuses and commission amount-PAYEVNTEMP262	Bonuses and commissions that are paid as lump sum payments instead of with each regular pay period: Bonuses – made to an employee in recognition of performance or services. This might include bonuses that aren’t related to a particular period of work done. Commissions – made to an employee in recognition of performance or services. Commissions might be calculated as a portion of the proceeds or volume of sales.	Bonuses and commission items	PAYEVNTEMP262
CDEP Amount-PAYEVNTEMP279	Payment amounts made under the Community Development Employment Projects (CDEP).	CDEP Amount	PAYEVNTEMP279
Directors Fees-PAYEVNTEMP264	Directors’ fees include payments to the director of a company, or to a person who performs the duties of a director of the organisation. Directors’ fees might include payment to cover traveling costs, costs associated with attending meetings and other expenses incurred as an organisation director. The complete amount of payment must be reported, specifically the full presacrifice value of the fees, before any salary sacrifice is deducted from the amount.	Directors Fees	PAYEVNTEMP264
Exempt Foreign Income Amount-PAYEVNTEMP261	Reports exempt foreign income for qualified SAW employees for STP reporting purposes only. If you mapped an earning code to report under the Exempt Foreign Income Earning code and added the earning in a quick entry, when you calculate the pay run, you can view the exempt foreign income in the STP preview slide-out panel.	Exempt Foreign Income Amount	PAYEVNTEMP261
Lump sum payments-PAYEVNTEMP273	Some payments have concessional tax treatments related to the timing or nature of the lump sum payment. These payments are separately itemised in historical ATO reporting, including Group Certificates, Payment Summaries, and the current STP pay event.	Payments including: Return to work payment (W) Note: Lump sum payments, which are paid out as part of termination payments include: Lump Sum A – Type R (R); Lump Sum A – Type T (T); Lump Sum B (B); Lump Sum D (D). No mapping is required as it’s controlled using dedicated system tax compliance rules for termination payments and with dependency on inputs on a terminated employees’ profile in the Payroll > Termination Payments screen. Lump Sum E (E) which represents the amount for back payment of renumeration that accrued, or was payable, more than 12 months before the date of payment. Reporting of this lump sum payment using STP doesn’t need mapping. However, using the respective system tax compliance rule is required with dependency on input from a quick entry on the earning’s Business Date.	PAYEVNTEMP273
Overtime amount-PAYEVNTEMP263	Employees’ overtime pay. Overtime refers to when an employee works: 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 that are worked). Payments for work done outside an employee’s ordinary hours of work aren’t ordinary time earnings.	Overtime amount	PAYEVNTEMP263
Paid leave-PAYEVNTEMP268	Paid leave is time off work paid by the employer. Paid leave includes an absence from work where the payer remunerates payment to the payee either in service or upon termination. You must report all YTD amounts for paid leave as the presacrificed YTD amount of the payment, and not the postsacrificed YTD amount. Paid Leave contains a Paid Leave Type and Paid Leave Amount (YTD) field.	Paid leave types include: C – Cash out of leave in service U – Unused leave on termination P – Paid parental leave W – Workers’ compensation A – Ancillary and defense leave O – Other paid leave	PAYEVNTEMP268
PAYEVNTEMP266-Salary Sacrifice	The salary sacrifice types that are set up for a deduction: S (Superannuation) – an effective salary sacrifice arrangement, entered into before the work is performed, where contributions are paid to a complying fund, where the sacrificed salary or wages are permanently foregone. O (Other Employee Benefits) – an effective salary sacrifice arrangement, entered into before the work is performed, for benefits other than for superannuation, where the sacrificed salary or wages are permanently foregone.	When you select the options: PAYEVNT category: Salary sacrifice amounts-PAYEVNTEMP226 O-Other Employee Benefits: PAYEVNT Code FBT Status: Blank The default setting changes to N - Not reportable for FBT if no FBT is selected to reduce reporting errors.	PAYEVNTEMP266

Additional Notes on STP PAYEVNT Mapping

Lump sum payments-PAYEVNTEMP273

The data structure has changes for lump sum payments between the PAYEVNT.2018 service and the PAYEVNT.2020 service:

PAYEVNTEMP266-Salary Sacrifice

The AUS Earning Deduction STP Pay Event Report shows information from each PAYEVNT category, PAYEVNT code, and FBT Status. The added data is visible in the Additional Detail Code and Description, aligning with the STP PAYEVNT mapping:

Mapping Earning or Deduction Codes to a Payment Type Reported Using STP

To map earning codes to a payment type that’s reported using STP:

1. Go to Payroll Setup > Earnings and Deductions.
2. Click the Earnings tab and select the earning to map to its respective category.
3. In the General tab, in the STP PAYEVNT Mapping section, select one of the following pay event categories in the PAYEVNT Category drop-down list:
   • Allowances - PAYEVNTTEMP226
   • Bonuses and commission items - PAYEVNTEMP262
   • CDEP Amount- PAYEVNTEMP279
   • Directors Fees - PAYEVNTEMP264
   • Exempt Foreign Income Amount-PAYEVNTEMP261
   • Income Fringe Benefits Reportable - PAYEVNTEMP281
   • Overtime amount - PAYEVNTEMP263
   • Paid Leave - PAYEVNTEMP268
4. Select the pay event code in the PAYEVNT Code drop-down list.
5. When applicable, select the OTE Earning checkbox to include the earning as part of ordinary time earnings.
6. Click Save.

To map deduction codes to a payment type that’s reported using STP:

1. Go to Payroll Setup > Earnings and Deductions.
2. Click the Deductions tab and select the deduction to map to its respective category.
3. In the General tab, in the STP PAYEVNT Mapping section, select a pay event category in the PAYEVNT Category drop-down list field:
   • Deductions - PAYEVNTTEMP227
   • Income Fringe Benefits Reportable - PAYEVNTEMP281
   • Salary Sacrifice Amounts- PAYEVNTEMP266
   • Superannuation Contribution - PAYEVNTEMP228
4. Select the pay event code in the PAYEVNT Code drop-down list field.
5. When applicable, select the OTE Earning checkbox to include the earning as part of ordinary time earnings.
6. Click Save.

View STP Phase 2 Information

You can preview an off-cycle pay run that is committed after STP Phase 2. To see all of the information that is sent to ATO at the payee level from the PAYEVNTEMP level, expand the STP Preview Validation slide-out panel in Payroll > Pay Run Management.

After a pay run is committed, STP submission files are automatically generated and forwarded to Dayforce STP before it’s submitted to the ATO STP service. The responses (for example, information, warning, or errors) from the ATO STP service might take up to a couple of hours (varies and depends on the ATO service) for the responses to flow back to Dayforce. The following STP Submission Message Knowledge Map illustrates the high level of various types of responses, which are associated with this process and can be seen and tracked in Dayforce.

Users with access rights can view the STP Submission Status Report in Payroll > Overview and Payroll > Pay Run Management and find the report using Global Search on the Home screen.

Upon validation of the year end for a legal entity, you can view the generated STP Finalisation report in the Archived Reports tab of Year End > Australia Year End.

Support for Income Stream Types

Foreign Employment Income - Income Stream STP Phase 2

To support foreign employment income in STP Phase 2, use the following tax and compliance code and tax:

• Earning tax and compliance code: AUS Foreign Employment Income Gross Amount
• Tax: Foreign employment tax

All foreign employment income paid should have its corresponding income stream mapped in the Employment > Employee Properties screen in People:

Note: Don’t override an income stream and always end date the previous row before creating a new one.

Seasonal Worker Programme (SWP) Income - Income Stream STP Phase 2

STP 2 reporting of employees under the Seasonal Worker Programme (SWP) includes support for tax and reporting requirements (flat rate and associated STP tax treatment code) for SWP employees. STP 2 reporting streamlines operations by reducing work required to manually override PAYG and applies automatic tax treatment codes against the flat rate.

To set the appropriate tax options and tax treatment codes for employees under SWP:

1. Go to People, open the employee profile, and click Employment > Employee properties.
2. In the Value drop-down list, select the Seasonal worker program option as the income stream type code.
3. Go to the Payroll > Tax Definitions screen in People to set the appropriate tax rate and tax treatment codes under the SWP income stream type for the pay run.
4. Select the Seasonal Worker Programme - Flat Rate option in the Additional Tax Options drop-down list of the Federal Tax Info section to set the tax rate and tax treatment codes for employees under the SWP income stream type.
5. In the Flat/Comissioner Installment Rate field, enter the rate at which all payments to the employees will be withheld. Note: After the Seasonal Worker Programme - Flat Rate and Flat/Commissioner Installment Rate are provided, the Tax Treatment Code is automatically generated accordingly.

Voluntary Agreement (VOL) Income - Income Stream STP Phase 2

Independent contractors who have the PAYG withholding agreement must be reported through STP under the Voluntary Agreement (VOL) income stream type.

Note: Contractors whose net payments are processed in Dayforce and without any PAYG withholding are excluded from STP reporting. To bring the contractors in STP reporting, the contractors are required to either form PAYG withholding agreement or receive only superannuation payments (employer's contribution) in Dayforce.

To start paying or reporting the contractors, an Employment Type is required. To store the ABN and Trading Name, if provided, see Add Employment Types in the HR Administration Guide.

To report contractors through STP:

1. Go to People, open the employee profile, and click Employment > Employee properties.
2. In the Value drop-down list, select the Voluntary agreement option as the income stream type code.
3. Go to the Payroll > Tax Definitions screen in People to set the appropriate tax rate and tax treatment codes under the VOL income stream type for the pay run. In the Additional Tax Options drop-down list of the Federal Tax Info section, select one of the following options to set the tax rate and tax treatment codes for the contractor.

To report contractors who have only superannuation payments processed in Dayforce using STP:

1. Go to the Payroll > Tax Definitions screen in People.
2. In the Federal Tax Info > Extended Definition section, select the Contractor - Opt in for Super Liability Only Reporting via STP checkbox.