Nanny Payroll Changes for 2022

Make Sure You are Prepared for Single Touch Payroll Phase 2

Some changes are as good as a rest. Others can feel like a banging headache. Let’s face it, grappling with a new chapter of Australia’s Single Touch Payroll (STP) system is unlikely to feel like a relaxing head massage. It is, however, important.

Cue fanfare! From January 2022, the government’s rolling out STP Phase 2. We’re here to help you get to grips with the key points.

STP is the way you, as an employer, should be reporting your nanny's tax and super info to the Australian Taxation Office (ATO). Read on for the lowdown on how STP Phase 2 will affect you.

Some Good News!

The ATO’s been clear that, although the deadline for STP Phase 2 compliance is January 1, 2022, it will be taking a pragmatic approach to the change. That’s not a green light to ignore and delay but it means that if you “show willing” you’re less likely to be in trouble if you make a slip-up.

The ATO is also keen to flag up the benefits of the changes to both you and your nanny. Here are some that may apply to you as the employer of a nanny:

1. You'll no longer have to send your nanny’s TFN declaration info to the ATO. Your nanny can give it to you and you can simply keep it with your records.
2. Sometimes it happens that you might decide to change your software or your nanny’s payroll ID. It’ll be possible to let the ATO know this in your STP report.
3. This is the big one. The ATO is going to instantly share the payroll info you submit with Services Australia. The hope is that it will streamline payroll info for you and make it easier for your nanny to get hold of things like older payslips.
4. It may be that you’ll no longer need to provide separation certificates if your nanny leaves. The info will simply appear in your STP report.
5. There’ll also be an option to report child support deductions through STP. You wouldn’t then need to send anything separately to the Child Support Registrar.

Here are some of the potential benefits of STP Phase 2 for your nanny:

1. Tax return time should be easier. That’s because there’ll be better visibility of types of income received and where it should be pre-filled on a tax form.
2. There’ll be an improvement in communication about things like Study and Training Support Loans. That should weed out potential errors that could lead to a nanny paying more tax than they should.
3. They may already get help from Services Australia. If so, they should notice big improvements in communication and a reduction in paperwork.

What’s Not Changing

Even though you’ll need to supply additional information in your STP report, many things will stay the same. These include things like:

• The types of payments you need to make
• Your tax and super obligations
• The end of year finalisation requirements

Some other tasks will become easier and simpler.

Key Points Explained

Currently, your STP report will include a gross amount. This is the total of what can be a variety of components and payment types. Some of these get different treatment for social security purposes. As a result, you will in the future need to report more detail.

There are lots of dependencies connected to helping you figure out the right amount to withhold from your nanny’s wages. These may relate to the info they supply in their TFN or withholding declaration or their employment information.

In STP Phase 2 you will have to report this information in each STP report, reflecting any changes, if any, to your nanny’s employment basis.

You must always report your nanny’s commencement date. You should also supply information about your nanny’s employment basis according to their work type. Here are some of the key examples:

• Full-time (F) This applies to someone who works full ordinary hours
• Part-time (P). There will be an expectation of continuity of employment
• Casual (C) There will be no expectation of continuity of engagement

Income Types

You will already be informing the ATO about the type of income your nanny receives in your STP report. In Phase 2 the info you provide will also do the following:

• Identify payments you make to your nanny with specific tax consequences
• Make it simpler for your nanny to complete their individual income tax return

Tax Treatment

Your STP Phase 2 report is going to include a 6 character tax treatment code for your nanny. The tax treatment code informs the ATO about certain factors. These are things that can influence the amount you withhold from payments to your nanny.

Submitting this information through your STP report has a key advantage. It means that when your nanny gives you a TFN declaration you no longer need to send a copy to the ATO.

Your STP software programme will automate the reporting of the applicable code and ensure that it’s valid. It is important that you’re across what the code stands for.

Your Digital Service Provider

Your DSP will be updating their STP-enabled software. This will then allow them to offer Phase 2 reporting. When it’s all ready to go, your DSP will inform you about what you need to do.

There are some things you can do now to get yourself ready. This might include reassessing whether it’s the right moment to review how you manage your nanny payroll. If you do it yourself, it might be time to hand it over to a payroll provider.

The Simplest Way to Meet Your Nanny Payroll Obligations

If you’re a busy parent, it’s highly likely that you may feel you have more pressing things to worry about than complying with STP Phase 2. If so, there is a solution. That lies with using a payroll provider like Pay the Nanny Australia.

We take pride in keeping on top of all the ins and outs that come with paying your nanny. If you’re at all unsure about what you need to do to be compliant with the STP Phase 2 rollout, talk to us and we’ll sort it all for you.

Get in touch with Pay the Nanny now for all your nanny payroll needs.