If your business uses Xero (or any of the other excellent payroll packages available), you may have seen Payroll changes rolling out for each of the various stages of Single Touch Payroll (STP). The final stage of the rollout includes the requirement to track additional data around paid leave ( Stage 3).

To refresh your memory around STP and it’s expansion, the goal is to use STP to reduce the reporting burden for employers who need to report information about their employees to multiple government agencies. Luckily for business, most of the additional tracking needs are already included inside your payroll applications.

Essentially, the tools already allow you to record

• details of the remuneration you pay including
  • the type of income for the employee (such as salary and wages, or working holiday maker income)
  • the components which make up the amounts (such as gross pay, paid leave, allowances or overtime)
• details of your pay as you go (PAYG) withholding including
  • the amounts you have withheld from payments you make
  • information about how you calculated the amount, which you currently provide to the ATO by sending a copy of the employee’s TFN declaration
  • super liability information.

So what is going to be required in Stage 3?

Stage one – The first part of this process was transitioning your existing employee profiles to be STP Phase 2 compliant.
Stage two – Identifying and updating certain pay items with the new earnings categories defined by the ATO for STP Phase 2 reporting.
Stage three – This is the final stage in the STP Phase 2 transition which will break down paid leave into additional subcategories. This is to meet the new ATO reporting requirements. The new categories ensure that leave payments made to your employees are reported to the ATO using the correct reporting codes.

Previously, earnings were grouped together to form part of the gross payments figure. Under STP Phase 2, the ATO requires paid leave to be reported as a separate figure to gross payments.

You need to assign a leave category to each of your active leave pay items in your organisation. The category determines how the payment is reported to the ATO through STP. If you are keen to dive into what is specifically required for this by the ATO, you can find that here. You will now need to categorise any existing paid leave types you have set up in your payroll system. The categories (or equivalent) available include:

Other paid leave (Type O)

• Annual leave
• Compassionate and bereavement leave
• Family and domestic violence leave
• Long service leave
• Personal (sick/carer’s) leave
• Rostered day off
• Special paid leave
• Study leave
• Time off in lieu

Ancillary and defence leave (Type A)

• Community service leave
• Defence reserve leave
• Jury duty leave

The good thing is, is that your payroll system will most likely be helping you step through these processes. If you are lucky enough to have our fabulous bookkeeping team in your corner, then you don’t have to worry at all! Let our team sort this out for you.

If you are concerned about all the changes and want to make sure that your Payroll reporting is correct, please reach out to our team. We love to help you with payroll or any of your tricky bookkeeping questions.