Tax & Super Australia (TSA) has welcomed the ATO’s decision to give businesses and digital service providers (DSPs) more time to transition to phase 2 of single touch payroll (STP) in light of the extra workload businesses have taken on during the COVID-19 pandemic.

The second phase of STP, known as STP2, continues the automation of data flow – particularly in relation to information needed by Services Australia to support individuals to get the right payment at the right time. Information collected by STP2-enabled software will flow directly to Services Australia, allowing them to streamline their services.

STP2 was originally intended to start on 1 July 2020. However, the ATO has extended this date to 1 January 2022. And while 1 January 2022 remains the mandatory start date, the ATO has confirmed that it will consider employers who start using STP on or before 1 March 2022 to be reporting on time.

TSA tax specialist Neville Birthisel said the ATO’s extension would give many businesses some much-needed breathing space.

“Since March last year, businesses and their advisers have had a huge amount of extra finance, operational and staffing matters to manage during the pandemic and resulting lockdowns,” Mr Birthisel said.

“This STP2 extension is good news for these businesses. We applaud the ATO for taking into consideration how the complexity of the data sought by Services Australia, compounded by the challenges of COVID-19, has added another layer of pressure to businesses.”

Mr Birthisel noted that the ATO has committed to no penalties for genuine mistakes for the first year of STP2 reporting until 31 December 2022. “This gives employers time to transition and time to get things right.”

“We are also pleased that the ATO will allow DSPs to apply for a deferral so they have more time to complete their software development and roll it out to their clients.” STP is the process by which taxation and superannuation information is sent directly from STP-enabled software to the ATO.