What Is STP Phase 2?
Single Touch Payroll Phase 2 started in 2022.
Your payroll software now reports detailed information to the ATO every payday. Not quarterly. Every single payday.
The ATO watches in real-time. If something’s wrong, they see it immediately.
Phase 2 reports include:
- Gross pay (broken down by type)
- Tax withholding
- Superannuation
- Employment basis
- Qualifying earnings
This matters because: Wrong information = automatic penalties. The ATO doesn’t wait for audits. They detect errors now.
Mistake 1: Wrong Pay Category Breakdown
You report gross pay as a single figure. Wrong.
STP Phase 2 requires you to break down pay into categories:
- Salary
- Overtime
- Allowances
- Commissions
- Bonuses
Example: You pay Sarah $800/week salary + $200 allowance. You report $1,000 as salary. The ATO’s system expects $800 salary + $200 allowance. Mismatch.
The cost: The ATO flags it. You face a compliance notice. You have to resubmit.
How to fix it: Check your payroll software. Does it split pay by category? If not, you’re reporting wrong. Update it before your next pay run.
Mistake 2: Incorrect Superannuation on Qualifying Earnings (QE)
You calculate super on salary only. Wrong again.
Under STP Phase 2, super must be calculated on Qualifying Earnings, not just salary.
QE includes:
- Salary
- Allowances
- Commissions
- Loadings (shift, danger money)
Example: Tom earns $1,000 salary + $100 allowance. Old rule: 12% super on $1,000 = $120. New rule: 12% super on $1,100 = $132. You’re underpaying by $12 per week.
Multiply that across all employees. It compounds fast.
How to fix it: Review your QE calculation. Update your software to include allowances and commissions in super.
Mistake 3: ABN Mismatch on Super Submissions
You process payroll under one ABN. You submit super under another ABN. The ATO sees a mismatch.
Who gets caught:
- Multi-entity businesses
- Franchises with centralized payroll
- Related company structures
Example: You employ staff for Business A. But you submit super under Business B’s ABN. The ATO’s STP data says: “Business A staff, Business B’s super.” Red flag.
The cost: Both entities face compliance action. Directors can get penalty notices.
How to fix it: Ensure each entity’s payroll uses its own ABN for super submissions. Check your software’s ABN settings.
Mistake 4: Missing STP Finalisation Deadline
STP requires a finalisation declaration by 14 July each year.
This isn’t optional. It closes out your payroll year with the ATO.
Example: You forget to lodge it. You miss the deadline by one day. The ATO assesses penalties of 1 penalty unit ($330) per 28 days late.
The cost: Adds up fast. One month late = 2–3 penalty units ($660–$990).
How to fix it: Set a calendar reminder for 1 July. Lodge your finalisation by 14 July every year.
Mistake 5: Incorrect Tax Withholding
You withhold $200/week tax. The employee’s actual tax should be $180/week.
Over a year, you’ve withheld $1,040 too much. The employee gets a refund. But the ATO also flags your software settings as wrong.
Example: You haven’t updated your tax tables for the July 2026 income tax cuts. Your system uses old rates. Systematic withholding errors across all employees.
How to fix it: Update payroll software whenever tax rates change. For 2026, expect updates in June and June 2027.
Get Your STP Setup Right
STP Phase 2 errors are expensive. Penalties, compliance notices, re-submissions.
Don’t guess. Check your setup.
In Campbelltown and Sydney, we audit STP compliance for small businesses.
📞 Call: 04 044 71 816
We’ll verify your setup, fix category breakdowns, confirm QE calculations, and ensure ABN alignment.
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