Single Touch Payroll (STP) Phase 2: Tax treatment code

Overview

You no longer need to lodge a tax declaration with the ATO and instead, you will report your employees' tax treatment to the ATO via STP. We will collect each employee’s tax setting information, respectively, and then the payroll platform will auto-generate a six-character tax treatment code.

This code is an abbreviated way of telling the ATO about the factors that can influence the tax withheld amount to employees. It comprises a combination of:

  • Tax scale category.
  • Options within each category.
  • Study and Training Support Loan (STSL) status.
  • Medicare Levy settings.

Current STP tax categories

Working Holiday Makers

This category applies to foreign residents for tax purposes who are working in Australia under a subclass 417 or subclass 462 visa or other bridging visa arrangement. Employees would need to be selected as A Working Holiday Maker via the Tax Declaration page.

Seasonal Worker Programme

This category applies to non-residents of Australia for tax purposes engaged under the SWP administered by the Department of Employment, Skills, Small and Family Business. Employees would need to be selected as A Seasonal Worker Programme Employee via the Tax Declaration page.

Helpful Hint

You can refer to the ATO website for further information on employees under the Seasonal Worker Programme.

Foreign Resident

This category applies to employees who need selected A Foreign Resident for Tax Purposes option via the Tax Declaration page.

Important

It excludes working holiday makers, employees otherwise classified as horticulturists and shearers, and seasonal worker programme employees.

No TFN

This category applies to employees who have entered a tax file number of 000000000. These employees would have this number because:

  • They have not provided a tax file number declaration.
  • They have provided a tax file number declaration but have not supplied a tax file number.
  • They have provided a tax file number declaration but have supplied an incorrect/invalid tax file number and also not claimed an exemption from having to provide a tax file number

Important

This excludes seasonal worker programme employees.

Voluntary Agreement

This category applies to a contractor under a voluntary agreement to withhold under section 12-55 of Schedule 1, Part 2-5 of the TAA 1953. This also includes those who have informed the payer of their CIR that they don’t have a CIR and if the payment includes an amount for GST. We will not support this category in Employment Hero Payroll.

New STP tax categories

Regular

This category applies to all employees not otherwise covered by another more specific option, including directors, office holders, religious practitioners, labour hire workers and Pacific Labour Scheme workers. If you have not assigned a tax category to an employee, the payroll platform will automatically assign them the Regular option.

Actors

This category applies to Australian residents for tax purposes who have provided a valid TFN or TFN exemption reason and are actors, variety artists and other entertainers who receive payments for their performances. It includes employees performing promotional activities. Upon selecting Actor, you will need to select one of the following sub-category options:

  • With tax-free threshold.
  • No tax-free threshold.
  • 3 or fewer performances per week.
  • Promotional.

Important

Employees classified in this tax category have a specific tax table that is currently not catered to on the payroll platform. You can set up a recurring tax adjustment in Employment Hero Payroll so that the platform automatically calculates the withholding amount in the pay run.

Horticulturists and Shearers

This category applies to employees working for a continuous period not exceeding six months in one of the following situations:

  • Horticultural process associated with the production, cultivation or harvest of a horticultural crop.
  • In the shearing industry, such as shearers, crutchers, wool classes, cooks, shed hands and pressers that have provided a valid TFN or TFN exemption reason.

Upon selecting the Horticulturist and Shearer tax category, you will need to select one of the following sub-category options:

  • With tax-free threshold.
  • Foreign resident.

Important

This category includes foreign residents but excludes working holiday makers or seasonal worker programme employees, as they have their own tax category.

Important

Employees classified in this tax category have a specific tax table that is currently not catered to on the payroll platform. You can set up a recurring tax adjustment in Employment Hero Payroll so that the platform automatically calculates the withholding amount in the pay run.

Seniors and Pensioners

This category applies to employees who fall into one of the following situations:

  • Aged 66 years or older.
  • Veterans receiving a service pension and/or war widows/widowers receiving an income support supplement from the Department of Veterans Affairs who are at least 60 years of age.

Upon selecting the Senior and Pensioner tax category, you will then need to select one of the following sub-category options:

  • Single.
  • Married.
  • Couple separated because of illness.

Important

Employees classified in this tax category have a specific tax table that is currently not catered to on the payroll platform. You can set up a recurring tax adjustment in Employment Hero Payroll so that the platform automatically calculates the withholding amount in the pay run.

ATO-Defined

This category applies to employee who the ATO has issued a written notice to an employer to:

  • Vary the PAYG withholding downwards for gross income or specific payments only of an employee.
  • Where the payee is a death beneficiary who is not also an employee, or where the employee does not have coverage under any other tax table, such as for a non-employee for superannuation guarantee purposes only.

Upon selecting ATO Defined, you will need to select one of the sub-category option:

  • Death beneficiary.
  • Downward variation.
  • Non-employee.
Daily Casuals

This category applies to employees whose work patterns are irregular and have no job certainty, such as casuals who may only rely on daily income, regardless of the frequency of payday.

Important

This category includes foreign residents but excludes working holiday makers or seasonal worker programme employees, as they have their own tax scale category.

Important

Employees classified in this tax category have a specific tax table that is currently not catered to on the payroll platform. You can set up a recurring tax adjustment in Employment Hero Payroll so that the platform automatically calculates the withholding amount in the pay run.

Study and training support load (STSL) Status

Employees would need to have selected Yes to the question Do You Have a Higher Education Loan Program (HELP), Student Start‑up Loan (SSL) or Trade Support Loan (TSL) debt via their tax declaration page. This results in an obligation for the employee to repay a higher rate of withholding when they have reached the required income threshold.

Helpful Hint

STSL is permissible for the following tax scale categories: Regular, Senior & Pensioners, Foreign Resident

Medicare Levy Settings

The Medicare levy is 2% of an employee's taxable income and is in addition to the tax paid on taxable income. We automatically calculated the Medicare levy as part of PAYG amount withheld in the pay run and will calculate an employee's actual Medicare levy upon lodging their income tax return.

An employee may be eligible for a reduction or exemption from paying the Medicare levy, however, this depends on the circumstances of the individual and their spouse. Determining eligibility for a reduction or exemption is the responsibility of the employee. An employee should communicate any Medicare circumstances by completing a Medicare levy variation declaration form.

Helpful Hint

Only employees with a tax scale category of Regular (excluding daily casuals and those not claiming the tax-free threshold) and 'Seniors & Pensioners' are eligible to have a medicare levy variation.

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