STP Finalisations — What You Need to Know

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The financial year changeover brings a multitude of added tasks to every business' to-do list; one of which is to complete their payroll finalisations. Similar to previous years, all Australian employers must complete their payroll finalisation process for the year using the Single Touch Payroll (STP) system.

With so many other 'moving parts' at this time of year, we refresh your memory on what you need to know about STP finalisations, including when to complete them.

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Completing your STP finalisations

Following the unique STP finalisation process for your payroll and accounting software is essential to ensure that your employees receive the correct information to lodge their tax returns. Whether you use Xero, Quickbooks, or MYOB, ensuring that you follow the process can reap benefits for ease of efficiency and accuracy for your business and ensure minimal errors with the information used for your employee's income tax return.

Top tip: many employees eagerly anticipate the arrival of 'tax time'. Given the current cost-of-living challenges, a small lump sum through a tax return may ease financial stress for many employees. Therefore, ensuring that your STP data is correct and lodged promptly can help build a positive employer/employee relationship. Finalising your STP data early is possible if the information is ready!

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The STP finalisation process — Phase 1 and Phase 2

On 1 January, 2022, the Australian Taxation Office (ATO) expanded the Single Touch Payroll system to send additional information to the ATO every time you lodge a pay run. This additional process is referred to as 'STP Phase 2'. Here's what you need to know about the different STP finalisation phases.

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STP finalisation phase 1

Effectively, finalising your STP data is how you advise the tax office that your STP reporting has been completed for the financial year for an employee.

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How to make a finalisation declaration

Before making a finalisation declaration, it's important to ensure that your STP information, payroll information and employee information are accurate.

Once you've provided the finalisation indicator for an employee, the Australian Taxation Office (ATO) will automatically populate the employee's income tax return and display it as 'tax ready' in the ATO online services portal, which can be accessed through myGov.

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Payment summaries

Under the Single Touch Payroll (STP) system, employers are not required to provide payment summaries to their employees for payments reported and finalised through STP. Instead, this information is made available to employees through ATO online services accessed via myGov, in the form of an income statement, which serves as the equivalent of a payment summary.

However, employers are still required to provide payment summaries and send a payment summary annual report to the ATO for any payments that were not reported and finalised through single touch payroll.

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STP finalisation phase 2

Phase 2 of your STP finalisation comprises the additional data that was sent for an employee every time you lodged a pay run. Expanding the STP finalisation into two phases was to assist employers in reducing the burden of reporting their employee's information to multiple government agencies and support the social security administration system.

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Due dates for STP finalisations

You can submit a finalisation declaration for an employee at any point during the financial year, such as for those who have ceased employment or after the financial year's end. The exact due date for STP finalisations varies depending on your organisation's circumstances, though:

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Employers with no closely held employees

The due date for end-of-year STP finalisation is 14 July.

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Employers with a mix of closely held and arm's length employees and a total of 20 or more employees

The due date for end-of-year STP finalisation is 30 September for closely held employees, while all other employees must finalise by 14 July 2023.

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Small employers (19 or fewer employees) with only closely held payees

The due date for end-of-year STP finalisation will be the payee's income tax return due date.

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Who can complete STP finalisations?

You have two options to report your payroll information. The first option is to utilise STP-enabled payroll software directly.

Alternatively, you can choose to engage a third-party service provider like Bonerath & Co. We can act as an external intermediary and handle the reporting on your behalf, as well as provide guidance and best-practice efficiencies across your entire taxation, payroll and end-of-year obligations.

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With the end of financial year only days away, don't delay in reaching out to the team at Bonerath & Co. to discuss how we can support you!

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