Answer
The STP Tax Treatment Code is a six-character code that Lightning Payroll calculates automatically from each employee's tax settings. It is submitted to the ATO with every Single Touch Payroll (STP) event under STP Phase 2 and tells the ATO which tax scale and withholding conditions apply to that employee. You do not type this code yourself ÔÇö Lightning Payroll derives it from the settings you have already configured for the employee.
Where to See the Code
In the desktop app: open an employee, go to Employees >> Tax Rates >> Tax Settings. The current code is displayed as a read-only label next to STP Tax Treatment Code.
In the online (web/mobile) app: open an employee, go to Employees >> Tax Rates >> Tax Settings. The Tax Treatment Code field appears near the top of the page. It is read-only and updates automatically when you save changes to the employee's other settings.
What Determines the Code?
The code is generated in real time from a combination of the following employee settings:
- Tax File Number ÔÇö whether a valid TFN has been provided. A missing or special TFN (such as 000 000 000) triggers an N (no TFN) prefix.
- Foreign Resident ÔÇö ticking Foreign Resident under Tax Settings sets the residency character to F.
- Tax Free Threshold Claimed ÔÇö affects the second character for regular (resident) employees.
- STSL (HELP, TSL, SFSS, etc.) ÔÇö whether the employee has a study and training support loan liability. Ticking Deduct STSL adds an S in the third position.
- Working Holiday Tax Scale ÔÇö enabling this under Employees >> Tax Rates >> Special Tax Rates sets the first character to H.
- Horticulture or Shearing industry ÔÇö selecting one of these industries under Employees >> Tax Rates >> Special Tax Rates sets the first character to C.
- Voluntary Agreement (PAYG) ÔÇö ticking Manual variation of PAYG withholding / Voluntary Agreement and supplying a valid ABN under Tax Settings sets the first character to V.
- Medicare Levy Exemption ÔÇö a full or half exemption affects characters five and six for resident employees.
- Dependants and spouse ÔÇö the number of dependent children and whether the employee has a spouse affect the final character.
How to Change the Code
Because the code is calculated automatically, you change it by updating the underlying employee settings rather than editing the code directly. Common scenarios:
- Working holiday employee ÔÇö tick Use Working Holiday Tax Scale under Employees >> Tax Rates >> Special Tax Rates and set the employee's Home Country. The code will begin with H. See How Do I Set Up Tax for Employees on a Working Holiday?
- Horticulture or shearing worker ÔÇö select the applicable industry under Employees >> Tax Rates >> Special Tax Rates. The code will begin with C.
- Foreign resident ÔÇö tick Foreign Resident under Employees >> Tax Rates >> Tax Settings. The code will begin with FF.
- Employee without a TFN ÔÇö if no valid TFN is recorded, the code will begin with N and higher withholding rates apply automatically.
- Voluntary Agreement contractor ÔÇö tick Manual variation of PAYG withholding / Voluntary Agreement and enter a valid Payee's ABN under Tax Settings. The code will begin with V.
ATO Validation Errors Related to the Code
If the ATO rejects an STP submission mentioning the tax treatment code, the most common cause is a mismatch between the code and other data in the submission ÔÇö for example, a working holiday employee whose Home Country has not been set. Set the missing field, then re-submit. If the code looks correct and the rejection persists, check the STP Phase 2 overview for the full list of employment and taxation conditions that are now reported to the ATO.
