Phase 2 reporting will include a six-character tax treatment code for each employee. The tax treatment code is an abbreviated way of telling the ATO about the factors that can influence the amount withheld from payments to employees. Reporting the tax treatment for each employee through STP means that when employees provide their TFN declaration (either online or hard copy), employers no longer need to send a copy of the declaration to the ATO. It will also allow the ATO to notify employees if they have provided their employer with incorrect information that may result in a higher tax bill for the employee at the end of the financial year.
The six-character tax treatment code is made up of a combination of:
- Tax scale category;
- Options within each category;
- Study and Training Support Loan (STSL) status; and
- Medicare Levy settings
For a video overview on tax treatment in Phase 2 click here.
For a detailed article on the subject click here.