STP Phase 2 for construction employers

STP Phase 2 requires construction employers to report each worker’s pay in more detail on or before payday. The hard part is mapping overtime, allowances, leave, employment basis and termination payments correctly before the payroll file reaches the ATO.

What changed under STP Phase 2

Single Touch Payroll already sent year-to-date wages, PAYG withholding and super liability information to the ATO. Phase 2 split those totals into more useful categories.

The framework started on 1 January 2022, although some payroll providers had approved deferrals. Construction employers now need to report details such as:

• employment basis, including full-time, part-time and casual
• income type, such as salary and wages or labour hire
• overtime as a separate amount
• bonuses and commissions
• paid leave by category
• allowances by their purpose
• salary sacrifice amounts
• lump sums and employment termination payments
• cessation dates and reasons
• country information for some foreign employment income

This reporting does not replace an award, enterprise agreement, employment contract or payslip. It tells government agencies what was paid and how it was classified. It does not prove that the amount was correct.

For more practical payroll guidance, see the payroll operations hub.

Where construction payroll gets tricky

A construction pay run can contain ordinary hours, overtime, rostered days off, travel, tools, site allowances and reimbursements. Two items with similar names can need different STP treatment.

Use the reason for a payment, not just the label in your payroll software. A payment called “site extra” tells you very little. You need to know whether it compensates for a task, reimburses an expense, covers travel or forms part of ordinary earnings.

Construction pay item	Likely STP Phase 2 treatment	What to check
Ordinary hours	Gross salary and wages	Confirm the worker’s employment basis and income type
Overtime hours	Overtime	Keep it separate from ordinary gross earnings
Tool allowance	Tool allowance category	Check whether it is a genuine allowance or reimbursement
Travel or fares payment	Relevant travel or transport allowance category	Check the purpose, award or agreement clause and tax treatment
Site or height allowance	Task allowance or another applicable category	Do not map every site allowance to the same code without checking
Annual leave or RDO taken	Paid leave	Use the leave category that reflects what was paid
Expense reimbursement	Generally not reported as an allowance	Keep receipts and confirm the employee spent money on the employer’s behalf
Unused leave on termination	Termination-related leave category	Separate it from normal leave taken during employment

Allowance treatment is not decided solely by whether the payment appears in an award or enterprise agreement. The ATO reporting category depends on what the allowance is for. Tax withholding and super treatment may also differ.

Employees, labour hire workers and subcontractors

Do not use the labour hire income type simply because workers move between projects or are called labour hire on site.

A labour hire firm generally reports payments to workers it employs under a labour hire arrangement. A builder that directly employs a casual carpenter would usually report salary and wages income with a casual employment basis.

A genuine independent contractor is not included in STP. Their payments may instead fall within taxable payments annual report rules. But calling someone a subcontractor does not settle their legal status. Control, delegation, risk, tools, payment arrangements and the full working relationship matter.

If a worker should legally be an employee, leaving them out of STP can also create PAYG withholding, super and Fair Work problems.

Super reporting is not the same as super payment

As at August 2026, the super guarantee rate is 12% of ordinary time earnings for eligible employees. STP reports the employee’s year-to-date super liability. It does not confirm that money reached the super fund.

That distinction matters on construction sites where overtime and allowances change each week. Some allowances form part of ordinary time earnings, while genuine overtime payments generally do not. Review each pay code rather than applying super to every earning or excluding every allowance.

Reconcile the super liability in STP against your payroll register, clearing house records and fund payment confirmations. A correct STP file does not fix a late or missing super payment.

Finalisation dates and penalties

As at August 2026, the normal STP finalisation deadline for most employees is 14 July after the end of the financial year. Finalisation tells the ATO that the employee’s income statement is tax ready.

As at August 2026, an employer with 19 or fewer employees can generally finalise eligible closely held payees by 30 September. Different rules can apply depending on employer size and reporting circumstances, so check the ATO requirements before relying on this concession.

Late or missing STP reports can attract a failure-to-lodge penalty. As at August 2026, one Commonwealth penalty unit is $330. For a small entity, the base failure-to-lodge calculation can be one penalty unit for each 28-day period, or part of a period, up to five units. That means a possible base maximum of $1,650 for an obligation. The ATO considers the circumstances and may first issue warnings or provide help, particularly where an employer is trying to correct the problem.

False or misleading reporting can lead to separate penalties. Do not knowingly send a guessed classification just to get the pay event accepted.

A practical check before each pay event

Start with a short payroll control routine:

1. Confirm starters have the right payroll ID, employment basis and income type.
2. Compare approved timesheets with ordinary hours, overtime and leave entered.
3. Review new or changed allowances against their actual purpose.
4. Check PAYG withholding and super treatment for unusual payments.
5. Confirm terminated workers have a cessation date, reason and correctly split final payments.
6. Reconcile payroll totals to the STP submission receipt.
7. Investigate rejected or partially accepted records straight away.

Be careful when changing payroll software or payroll IDs. An unnecessary new payroll ID can cause duplicate income statements unless the transition is handled correctly.

A regular payroll compliance audit calculator can help you check pay-code mapping, employee classifications and year-to-date balances before finalisation.

Fixing errors

If an STP amount or classification is wrong, correct the payroll record first. Then lodge an update event or include the correction in a later pay event where ATO rules allow it. Do not change only the employee’s payslip while leaving the STP year-to-date figure untouched.

Before finalisation, compare STP totals with payroll reports, PAYG withholding accounts, super liability records and the general ledger. On a busy site, five minutes checking a new allowance code is much easier than repairing a full year of employee income statements.