STP income types¶

Not all pay is the same kind of income. A salary looks different, for tax purposes, to a payment to a working holiday maker or a labour-hire contractor. In Single Touch Payroll (STP), each employee's pay is reported under an income type so the Australian Taxation Office (the ATO) knows what kind of income it is.

Why this matters¶

The ATO calls income types "a critical foundation" of the data reported to the ATO. Reporting the right income type lets the ATO apply the correct rules, and lets you flag any reporting concessions that apply. Getting it wrong can misclassify an employee's income.

What you will learn¶

• What an STP income type is
• Why the ATO wants pay reported by income type
• The common income types, and when a country code is needed

Understanding the concept¶

The ATO explains that pay is reported using an Income Stream Collection — the pay's components are grouped by income type and, for some income types, by country code. The ATO lists three main reasons income types matter: they let a payer flag a reporting concession, they clarify the payer's reporting obligations, and they help the ATO apply the right rules.

Some common income types the ATO describes are:

• Salary and wages — assessable income paid for work performed in Australia, other than income covered by another income type. (This is the income type most ordinary employees fall under; the ATO also refers to this grouping as Individual Non-Business.)
• Closely held payees — a payee directly related to the business, such as a family member of a family business, a company director or shareholder, or a trust beneficiary. The ATO notes concessions may apply to this class of payee.
• Working holiday makers — income for foreign residents holding a working-holiday visa (subclass 417 or 462).
• Labour hire — payments by a labour-hire business that arranges for workers to perform work or services for its clients. (Employees a labour-hire business employs in the ordinary way are reported under their actual income type, not as labour hire.)

There are other income types as well, such as seasonal worker programme, foreign employment and voluntary agreement. This lesson does not reproduce the full ATO code table.

Some income types must also carry a country code. The ATO explains that for income types such as foreign employment and working holiday makers, the pay must be reported with the country code for the relevant foreign country.

Example¶

A café owner employs three people. Two are ordinary staff paid for work in Australia, so their pay is reported under salary and wages. The third is a backpacker on a working-holiday visa, so their pay is reported under the working holiday makers income type — and, because that income type needs it, with the country code for their home country. Each person's income lands under the right grouping.

Common mistakes¶

• Reporting every employee as salary and wages when some belong under another income type, such as working holiday makers.
• Forgetting the country code where the income type requires one.
• Treating a labour-hire contractor the same as an ordinary employee — the ATO describes labour hire as a distinct income type.

How this works in myaccountant¶

Key points¶

• An income type groups an employee's pay so the ATO knows what kind of income it is.
• The ATO calls income types a critical foundation of the reported data.
• Common income types include salary and wages, closely held payees, working holiday makers and labour hire.
• Reporting by income type lets you flag any concession that applies.
• Some income types must also carry a country code.
• This lesson does not reproduce the full ATO income type code table.

Learn next¶

• What are employment conditions in STP?
• Country codes in STP
• Payment types and disaggregation of gross

General information only — not tax, super or financial advice.