Q: For tax purposes an Expat is not working on AU soil (say Thailand) however paid in AU dollars.  PAYE is backed out as paid in the working country. How will this be done for STP? With the automatic reporting, how are these employees backed out of the file?

A: Sections 3.1.9, 3.1.10 and 3.1.11 of the STP Payroll Reporting BIG (Business Implementation Guide) (button above) refer to managing the reporting requirements for Foreign Employment Income (FEI). This guidance, combined with granular detail on exactly how the employer manages that FEI, will dictate exactly what they need to do.

In general terms, Employers are permitted by the ATO to use one or a combination of methods for managing these reporting obligations – Estimate, Actual or a Reconciliation approach.

This particular circumstance looks like it falls into 3.1.10 Foreign Employment Income reporting obligations, whereby the payments being made to the employee are Foreign Income, as amounts of tax are withheld in the country in which they are working.

The Employer may choose to report this FEI to the ATO on either the regular Payroll Event reporting or through an Update event. There are specific sections of the Pay Event report which deal with FEI, INB etc – the MST and Data Definition Payroll Event document (button above) provide more detail on where this goes in the Pay Event message.

The Employer will have the option at any time to correct this information after Reconciling, by way of an Update event report.

Employers have the option of reporting this as regular Salary and Wages / PAYG and adjusting this to Foreign Employment income in an Update Event at the end of the year, accompanied by the Final Indicator.

Section 6.1.8 in the STP Business Scenarios document (button above) gives some great examples of this in practice (pages 61-70).


Q: Inward – An employee is paid out of the STATES and has an employee profile in EmpowerHR and pays only tax to the ATO.  How would this be affected or work for STP?

A:   Sections 3.1.9, 3.1.10 and 3.1.11 of the STP Payroll Reporting BIG (button above) refer to managing the reporting requirements for Foreign Employment income.

This guidance, combined with granular detail on exactly how the employer manages that FEI will dictate exactly what they need to do.


Q: Further info required – how does EmpowerHR deduct a PAYG amount with no income? 

A:  Section 6.1.8 in the STP Business Scenarios document (button above) gives some great examples of this in practice.


Q: Will this have an impact on our General Ledgers?

A:  General Ledgers shouldn’t be affected any more under STP than they are already under the current system. STP changes the reporting method and frequency to the ATO with some enhancements to the content of that reporting.

STP is meant to align with natural business processes, so we cannot foresee any significant changes to General Ledgers or their interfaces. This may be a question better directed to your organisations Finance-centric person?


Q: Are there any table changes to EmpowerHR or is this simply a file extract?

A:  There are potentially changes required to the application to accommodate some reporting requirements, especially in the areas of enhanced employer reporting of super obligations, such as OTE, amounts over OTE or YTD totals which may not yet be being captured.

 


Q: What does the output look like?

A: The Pay Event report is an XML file. The web service messages are exchanged using the ATO ebMS3 protocol.

The message payload is constructed using the XML format.  The SBR AU Dictionary has been used to define the elements within the messages.


Q: How will it handle reversals?

A: ‘Reversals’ is a broad topic and specific circumstances where a ‘reversal’ has taken place will give rise to different approaches for reporting this to the ATO.

In very general terms, employers have the option of either correcting YTD values already reported to the ATO either though a later Pay Event report or an Update event.

Employers can report the reduction in YTD values in the next Pay Event or may use the Update event service to report the ‘reversal’.

Small and Medium with holders will need to be conscious of ensuring that BAS totals for W1 and W2 are also amended, if required. This process sits outside of the Scope of STP.

Small and Medium with holders will need to be conscious of ensuring that BAS totals for W1 and W2 are also amended, if required. This process sits outside of the Scope of STP.

The STP Business Implementation Guide (BIG) refers to ‘reversals’ in many forms – Over payments in the Current Financial Year, Misclassification of payments, reporting under an incorrect ABN or Branch code, full file replacements and over payments from past Financial Years, including those that were not reported under STP.

Each of these scenarios have differing business rules and requirements for meeting the reporting obligations, but are certainly catered for in the BIG and the supplementary Scenarios documents from the ATO.


Q: What happens if a company migrates to a new provider?  Currently you have the option of providing an employee with 2 payment summaries.  One from the original payroll provider and a second from the new payroll provider.

A: This circumstance is covered off in Section 3.4 of the STP Business Implementation Guide (BIG), specifically 3.4.2 Transition between BMS during the financial year. It pertains to the use of the Business Management System ID (BMS ID).

Employers can choose to do one of three options:

  • Migrate YTD information to the new BMS and use the original BMS ID.
  • Migrate YTD information to a new BMS and create a new BMS ID. That means they will need to zero the employee YTD values from the old BMS ID via an update event, to prevent duplicate information being displayed.
  • An employer that does not migrate YTD information to the new BMS is required to finalise employees reported under the original BMS. The new BMS must have a different BMS ID to the original BMS.

Q: What happens if a fix is required but you are not aware of a fix within 14 days?

A:  You only need to provide the fix within 14 days of becoming aware of it.


Q: If there is an over payment why do we not need to adjust the tax withheld?

A: STP will not vary the rules that currently apply around over payment recovery, and the impact of identifying an over payment in Current or Prior Financial Years.

At present, if an over payment is identified in the Current Financial Year, then the employer is only obliged to recover the Net amount (Gross Amount, less any tax withheld – i.e. the amount actually paid to the employee) and is able to offset this PAYG reversal off a future payment to the ATO.

This over payment would be handled in an Update Event or, can be reported in the following Pay Event report, based on the guidance in the STP Reporting Payroll BIG.

Where over payments are identified in a following Financial Year, the ATO do not allow employers to recover the amount withheld from the employee. What the employer has to do is recover the Gross amount of the over payment and re-report the YTD Gross Earnings information accurately via an Update Event. The employee will then be able to have that Financial Year reassessed by the ATO and recover any tax over withheld directly from the ATO via a tax refund.

Section 3.2.5 of the BIG refers to over payments in the Current year

Section 3.3.7 of the BIG refers to over payment from prior Financial Years or those identified after EOFY.


Q: How will ETPs and in particular ETPs with multiple payment summaries be handled?

A:  ETPs are reported via the Pay Event report – there are specific fields on the PAYEVENT report to cater for ETP reporting (exactly the same information that would have been reported on the PSAR / ETP Payment Summaries)

With regards to Multiple ETPs, the Payment Date is the Primary Key to identify the multiple ETPs.

Each ETP is required to be reported separately and not be added together as YTD amounts.

Within the BIG, section 3.1.6 refers to ETP’s and Multiple ETP’s however further detail on where / how this is reported in the Pay Event can be found in the Data Definitions Payroll Event R2 document which provides greater detail on the Message Structure Table (MST)