Changing payroll software mid-year and transitioning STP records
This blog was updated on November 22, 2021
In 2019, it became mandatory for all Australian businesses to begin STP reporting. As a result, payroll systems had to build an STP reporting component into their software; or risk falling behind and losing customers to more advanced software. Since the initial roll-out, the Government announced that STP would be expanded (STP Phase 2) to include additional information and reduce the reporting burden for employers and registered agents providing payroll services.
If you’re reading this, you’re likely to be trying to understand the impact of STP Phase 2 requirements and how your current payroll software provider is preparing for the mandatory start date for Phase 2 reporting: 1 January 2022.
What if you’re currently not using KeyPay, but thinking about changing over payroll software?
It can be a pretty frustrating task migrating to a new payroll system. Most businesses make the decision to transfer at the start of the financial year to simplify the process as much as possible. Alternatively, when transferring to another payroll system during a financial year, businesses need to decide on the following:
- Do I bring across data for active employees only or employees terminated with the financial year also?
- Should I bring across YTD payroll figures or start anew?
- How do I transition STP?
All the above questions are interrelated and basically determine the response to the last question.
There are several ways you can transition STP reporting from one payroll system to another. All transitional options relating to STP, when migrating over to KeyPay during a financial year, can be found here. I’m sure you’re asking: what’s the ‘cleanest’ option? Which one will minimise any impact on existing records reported to the ATO? We’re happy to tell you...
Transitioning STP records to KeyPay using your existing BMS ID
The prerequisite of using this option is that the business brings across their employee YTD payroll data to KeyPay. Why would businesses bother doing this? Firstly, it allows for consolidated financial year reporting - if YTD data was not brought across, the business would have to generate reports from the previous and current payroll system and then merge the reports together… nightmare!!! Secondly, it allows employees to see correct YTD data on their pay slips.
So, once you’ve made the decision that importing YTD payroll data is the best way to go, the process of using the previous BMS ID to report STP going forward in KeyPay is as follows:
- Change the BMS ID in KeyPay to that of the previous payroll system's BMS ID;
- Copy over the employees' payroll ID used in the previous payroll system to the STP Payroll ID field in KeyPay. This is done easily using our employee import/export feature;
- Import YTD figures into this payroll system using the opening balances feature;
- Lodge an update event to report the YTD totals imported. Alternatively you can just wait to lodge your first pay event as this will include the imported YTD totals for the employees within that pay run.
Detailed instructions on how this process works can be found here.
What are the benefits of transitioning STP records using your existing BMS ID?
There are quite a few. They are:
- There will be only one record showing in the employee’s myGov account. Although a second record is not the end of the world, it’ll minimise any employee confusion or concern about why there is a second record to begin with.
- Not having to worry about creating a $0 event in the previous payroll system. If you have decided to migrate to KeyPay and bring across the YTD payroll data, you will need to ensure any STP events reported in the previous payroll system are wiped out in order to not over report employee payroll data. This would require lodging an event in the previous payroll system that reverses all YTD data already reported to the ATO.
- The finalisation process only needs to be done once. At the end of financial year, you will only need to create your finalisation event in KeyPay (and not your previous payroll system also) and reconciliation will be easy as all payroll data is stored in KeyPay.
If you're unsure about how your payroll software provider is meeting STP Phase 2 requirements or you're just looking to make the switch - you don’t need to wait until the new financial year to change providers. Our opening balances feature alongside the STP Payroll ID field making it a much simpler process, and removes the migration dread.
If you have any questions about managing STP with KeyPay or want to discuss any of your clients' payroll scenarios, please don't hesitate to get in touch.
Looking to find out more about how KeyPay has prepared for STP Phase 2? Take a look at our support articles. For more information on the importance of using reliable payroll software for STP Phase 2 reporting, download out our guide here!