Single Touch Payroll Australia: Complete Guide (2024)

Single Touch Payroll (STP) is the ATO's real-time payroll reporting system. Since it became mandatory for all employers, understanding STP is essential for every Australian business with employees.

This guide covers what STP is, how STP Phase 2 works, how to set it up, and your ongoing obligations.

What is Single Touch Payroll?

STP is a digital reporting framework that requires employers to report payroll information — salary and wages, tax withheld, and superannuation — to the ATO every time you pay your employees.

Before STP, employers reported annually via payment summaries (group certificates). STP replaced this with real-time reporting directly from your payroll software.

Key benefits for employees: Their income tax and super information is available in myGov in real time, making tax returns easier and pre-filled.

STP Phase 2 (Current Standard)

STP Phase 2 expanded reporting requirements from 1 January 2022. Most employers were compliant by end of 2023.

Phase 2 added:

• Disaggregated income types — separate reporting of salary, allowances, overtime, bonuses, and commissions
• Super liability reporting — your SG obligation per employee per pay event
• Income type codes — distinguishing between regular employment income, closely held payees, and working holiday makers
• Country codes — for employees with foreign income
• Child support deductions — deductions and garnishees reported directly to ATO

Who Must Use STP?

All employers — from sole traders with one part-time employee to large corporations — must use STP. There are no size exemptions.

If you have closely held payees (family members paid through your business), special rules apply — you can report quarterly instead of each pay event.

How to Set Up STP

Step 1: Choose STP-Compliant Payroll Software

Your payroll software must be STP-compliant. Look for products that are on the ATO's list of registered software providers. Finsori, Xero, MYOB, and QuickBooks are all STP Phase 2 compliant.

Step 2: Add Employee Details

In your software, add each employee's:

• Full legal name
• Tax file number (TFN)
• Date of birth
• Residential address
• Super fund details
• TFN declaration information

Step 3: Configure Pay Items

Set up your pay item types in the software:

• Ordinary time earnings
• Allowances (broken down by type — travel, car, uniform, etc.)
• Leave types (annual leave, sick leave, long service leave)
• Termination types (if needed)

Step 4: Process a Test Run

Process a practice pay run to verify everything calculates correctly before going live with real data.

Step 5: Start Reporting

From your first live pay run, your software sends an STP report to the ATO in real time. No manual steps needed after setup.

What You Report Each Pay Run

For each pay event, your software reports:

• Employee name and TFN
• Gross wages paid
• Tax withheld (PAYG)
• Super liability (the SG amount)
• Year-to-date totals for all of the above
• Income type and country codes (if applicable)

End of Year Finalisation

Instead of issuing payment summaries (group certificates), you finalise STP at the end of each financial year:

1. In your payroll software, run the STP finalisation for each employee
2. Confirm the year-to-date totals are correct
3. Submit the finalisation to the ATO by 14 July (or 31 July for closely held payees)

Once finalised, employees can access their income statement in myGov and complete their tax return with pre-filled information.

No Payment Summary Needed

After STP finalisation, you do not issue paper payment summaries (group certificates). Employees access their income information directly through myGov or the ATO app.

Common STP Mistakes

1. Using the wrong income type STP Phase 2 requires specific income type codes. Using "salary and wages" for an allowance is incorrect and can trigger ATO queries.

2. Not finalising at year end Employees won't be able to complete their tax returns until you finalise. Missing the finalisation deadline (14 July) can cause problems for staff.

3. Incorrect TFN declarations Each new employee must complete a TFN declaration before their first pay. Without a valid TFN, you must withhold at the top rate (47%).

4. Reporting irregularly STP must be reported on or before each payday. Batching up multiple pay runs and reporting them late is non-compliant.

Correcting STP Errors

Mistakes in STP reports can be corrected in your next pay run (for minor errors) or via an amended report. Your payroll software will have a process for this. The ATO generally doesn't penalise prompt corrections.

Using Payroll Software

STP is only practical with payroll software. Manual STP submission is theoretically possible via the ATO's online services, but it's time-consuming and error-prone.

Finsori is STP Phase 2 compliant and processes all reporting automatically as part of your normal payroll workflow.

Frequently Asked Questions

What if I have no employees for a period? You don't need to report in pay periods where no pays are processed. However, you should submit a finalisation at year end even if you had zero pay events.

Can I fix a mistake in a previous STP report? Yes. Process a pay run amendment in your software to correct errors. The ATO sees the corrected year-to-date totals.

What happens if I'm late with STP reporting? The ATO has a reasonable compliance approach but can apply penalties for persistent non-lodgment. Contact the ATO if you're struggling.

Do I need STP for irregular or casual workers? Yes. Every pay event for eligible employees must be reported, regardless of how often they work.

What about directors of companies? Director salaries paid under an employment arrangement are subject to STP. Director fees may also be reportable depending on the arrangement.

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Also see: Superannuation Employer Obligations 2024 · How to Lodge a BAS in Australia