Summary
Single Touch Payroll Phase 2 changed what you report, not how often. Every pay event still goes to the ATO on or before payday. What is different is that a single "gross" figure is no longer acceptable — gross must be broken into its components, and several things that used to be separate forms or separate filings now travel inside the STP report.
Most employers completed the transition through their payroll software and moved on. The reason to revisit it is that Phase 2 is not really a reporting change at all. It is a data change, and the data is what makes automated cross-checking possible. Once overtime is reported separately from ordinary earnings and allowances are itemised by type, the ATO can compare what you said you paid against what you paid in superannuation — without an audit, without a tip-off, and now, under Payday Super, within days.
Disaggregation of gross: the core change
Gross must be reported as separate components rather than one number:
- Gross — what remains after the items below are separated out
- Overtime
- Bonuses and commissions
- Directors' fees
- Paid leave, reported by type
- Allowances, itemised by category
- Salary sacrifice, split between superannuation and other benefits
- Lump sums, by category
The overtime line is the one with the most consequence. Overtime is generally not ordinary time earnings, so it does not attract superannuation guarantee — while ordinary hours do. By reporting the two separately you are handing the ATO both sides of that calculation every pay cycle.
Which means a long-standing error becomes visible: if hours that are really ordinary time have been classified as overtime, your super liability has been understated, and the data now says so. Equally, if genuine overtime has been lumped into gross, you may have been paying more super than required. Either way the discrepancy is now machine-detectable, and under Payday Super the comparison runs on a weekly or fortnightly cadence rather than quarterly.
Allowances must be itemised by type
Allowances are no longer a single bucket. Each is reported against a category — including car, transport, travel, laundry, meals, tools, qualifications, and task allowances, with a general "other" category that carries its own descriptions.
Category choice is not cosmetic. It determines how the amount is treated for withholding and how it appears on the employee's income statement, which flows into their tax return. A tool allowance reported as a travel allowance misstates the employee's position and puts them in the position of explaining it.
Two practical points. Reaching for "other allowances" as a default is the most common shortcut and the most common error. And the award is where allowance types come from — if your award provides a laundry allowance and a first aid allowance, those are the categories to map, rather than inventing local names that then have to be classified by whoever runs payroll.
Paid leave is reported by type
Leave is separated into categories including paid annual leave, paid personal or carer's leave, other paid leave, unused leave on termination, workers compensation payments where an employee is not performing work, and ancillary and defence leave.
This matters for the same reason as overtime: different leave types have different superannuation treatments. Workers compensation payments where no work is performed generally do not attract super; ordinary paid leave does. Reporting them as one figure concealed that distinction. Reporting them separately exposes it.
Employment conditions travel with the report
Phase 2 also carries information that used to sit elsewhere:
- Employment basis — full-time, part-time, casual, labour hire, and other categories.
- TFN declaration details reported through STP, so a separate paper declaration to the ATO is no longer required. You still collect the information from the employee and retain it.
- Income type and, where relevant, country code — salary and wages, closely held payees, working holiday makers, and others. This drives the correct withholding rates.
- Cessation reason when employment ends — voluntary cessation, ill health, dismissal, redundancy, contract cessation, or transfer.
The cessation reason deserves attention because it is chosen by a human, usually quickly, at a busy moment. It affects the employee's tax treatment and their dealings with Services Australia. Recording a redundancy as a voluntary resignation is not a clerical detail — it changes what they receive and can affect their final pay entitlements, including pro-rata long service leave in several states.
What this means in practice
Phase 2 rewards accurate source data and punishes approximations, because the categories force distinctions that a single gross figure hid. Three checks are worth running:
1. Is overtime classified correctly at the source?
Overtime is defined by your award — hours beyond the ordinary span, beyond the daily or weekly maximum, or outside a rostered pattern. It is not "whatever the payroll operator flagged". If ordinary and overtime hours are separated during pay processing by judgement rather than derived from recorded start and finish times against the award's span, the classification will drift.
2. Are allowances mapped to award-defined types?
Go through your award's allowance clauses and map each to an STP category once, deliberately. Then stop using "other".
3. Does the reported data reconcile to your super?
Take one pay period. Add reported ordinary earnings and the OTE-attracting components. Multiply by the current superannuation guarantee rate. Compare to what you actually contributed. If they do not agree, find out why now — because the ATO is running the same comparison.
Where the system helps
Everything above depends on a clean hours record. Ordinary versus overtime is a fact about when someone actually worked, measured against the award's span of hours — so it is decided by the time record, not by payroll.
NestedClock records actual start, finish and break times per shift per location, keeps rostered and worked hours side by side, and retains an audit trail for every adjustment. That gives payroll a defensible basis for splitting ordinary from overtime rather than a monthly guess, and it means an ATO query about a particular fortnight has an answer that predates the query. Our guide to integrating with Xero and MYOB covers getting those hours into the payroll system that files the report.
Where to check the detail
The authority is the ATO's STP Phase 2 employer reporting guidelines, which set out every category, code and treatment. Your payroll software vendor will publish its own mapping guide, and the two should be read together — the software determines what you can report, but the guidelines determine what is correct. Award allowance types are in your modern award.
This article is general information, not tax advice.