The time has come for us to get into the nitty gritty of Single Touch Payroll (STP) Phase 2.

​What is Single Touch Payroll? 
If you missed the memo, Single Touch Payroll or STP, is a process of electronic data reporting that Australian businesses use to share data with the Tax Office.  
If you have STP-enabled payroll or accounting software, it easily sends the ATO vital reports on things like salaries and wages, pay as you go (PAYG) withholding and superannuation liability.  
The STP process began a few years ago and the reporting items have been expanded for mutually beneficial reasons. Below we’ll discuss some of the critical changes for phase two of STP.  

Does knowing about STP 2 matter to you? 
If you have already engaged Preston Corporate Accounting to process Single Touch Payroll on your behalf, you’re all set. We’ll take care of the Phase 2 process for you. The details below are just for your information. 
For those clients that prepare their payroll themselves, we hope this article is helpful. Please remember that we are here for you as a resource if you need assistance at any time. 
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Phase 2 has already begun 
The purpose of STP’s second phase is to provide the different government departments with more detailed and current information to help improve the delivery of government services.  
The adoption of STP 2 is a compulsory government requirement and came into force on the 1st January 2022. However, users of Xero have until the 31st March 2023 and MYOB had an extension to the 31st December 2022.  
In summary, your accounting or payroll software (Xero, MYOB or QuickBooks) will provide you with the structure needed for the data input. However, you will need to increase your payroll skills to ensure the data you enter is correct. 

So many labels and codes! 
There are now many labels and codes to input for each employee. Understanding these codes is important; it will affect the employees’ government benefits and income tax basis. This includes things like child support and Services Australia entitlements. There are 86 codes to choose from and it is important that you choose the right one for each employee. 
There are quite a lot of labels and codes that need to be correctly selected to properly process payroll under STP 2.  
Here is the list: 

• Allowance types – 10 choices  
• Cessation Type – 7 codes  

• Deductions – 4 types 
• Eligible Termination Payments – 8 types  
• Employment Basis – 7 codes  
• Employment Category – 10 codes  
• Income Stream Types – 10 choices  

• Lump Sum – 6 types  
• Medicare Levy Exemption/Reduction – 2 codes  
• Medicare Surcharge – 3 tiers   
• Paid Leave Types – 6 choices  
• Reportable Fringe Benefits – 2 types  

• Salary Sacrifice – 2 types  
• Study & Training Support Loans – 2 codes  
• Tax Treatment – 9 codes  

These should be integrated into your software, but you may need to follow the STP 2 guides on the ATO website. You can also reach out to us if you need support. 
 
STP 2 implementation checklist 
If we aren't processing your STP, it is important that you approach the implementation of STP 2 in a structured manner and follow a checklist like the one below.

1. Set key milestones in an implementation plan. Set deadlines for each step in the process for your business based on the number of employees you have and your industry. Detail the key steps and when they need to be completed to ensure that you’ll be compliant by the due date. 
2. Keep on top of your payroll software notifications. Make sure you read the updates and the progress of your software provider. 
3. Decide the party responsible for the implementation of STP 2. Right at the start, assign the STP 2 payroll implementation role. Will it be yourself, your bookkeeper or Preston Corporate? Ensure they are aware of their responsibility. Training may be needed to ensure you have the proper resources. 
4. Inform your employees. Many employees will not be familiar with the changes. You may need their input in deciding the correct code to be used.  

Click on your software below for information to help guide you through the process:
Xero
MYOB
Quickbooks

​Where to from here? Don’t panic! Help is at hand.  
Now is the time to get an understanding of, and more detail on STP 2. Don’t wait until the last minute as there may be penalties. Your payroll software will determine the commencement date, so ensure you are on top of their progress. Our bookkeepers will be available to assist you in your setup, so don't hesitate to call us on (08) 9367 4199 if you need to.

Maintaining positive cash flow is essential for any business, big or small. Your business can experience some big problems when dealing with late payments, so it’s important to be proactive to stay on top of your invoicing.  
If you struggle with consistent late payments from your clients, here are some simple actions you can take that can really help.  
Don’t delay your invoices  
Your clients can't pay you if they don’t have your invoice. So be quick to send it to them. Customers are often more prompt in paying when they’ve just received the goods or services from you, so don’t delay. Cash in on that goodwill.  
Provide a detailed invoice 
Your invoice needs to have all the right information included. This includes your business details, their business details, payment instructions, description of the work or product, date of delivery, and any customer requirements like purchase order numbers. You also want to have a clear due date.  
Ask for prompt payment 
Many clients may be used to having weeks to pay invoices, but that’s changing. Over a third of businesses in Australia request payment within a week. It helps set an expectation of prompt payment.  
Make it easy to get paid 
Your clients will typically pay faster if they can use their preferred payment method. Consider offering various options, including cash, bank transfer, credit card or PayPal. You want as few barriers between you and your payment as possible.  
Don’t forget to chase payments 
You’re not done when the invoice is sent. You’ll still need to follow up with the client to ensure the payment has been processed. Have a system that lets you know when an invoice comes past due and give them a call. Don’t let them forget or think that you forgot.  
Withhold delivery until payment 
If you have new clients or clients with a history of late payments, consider switching up the process. Invoice them first, and don’t deliver the final service or product until you've been paid. This prevents the client’s ability to pay late or try to avoid paying completely, and it’s common practice for many businesses and services now.  
Consider direct debit arrangements 
If you have clients whom you work with or service on a regular basis, consider an agreement where you can charge their bank or card from your end. We do this with many of our clients because it makes it easier and faster for both of us.  
It’s important to remember that you provide a valuable service or product to your clients. And that should never be taken for granted. You deserve to be paid efficiently and professionally. 
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And don’t forget, you can always talk to us about your invoicing system and business practices. We can help you streamline things and get you paid faster. ​