If you employ staff in Australia, you're required to report payroll information to the ATO through Single Touch Payroll. Here's what it involves, who it applies to, and how to keep your business compliant.
What is Single Touch Payroll (STP)?
Single Touch Payroll is the ATO's digital reporting system for employers. Each time you run payroll, STP-enabled software sends the ATO details of salaries and wages paid, PAYG withholding, and superannuation liability information — in real time, rather than in a lump report at the end of the financial year. It replaced the old system of annual payment summaries (group certificates) with continuous, pay-cycle-by-pay-cycle reporting.
Who needs to report through STP?
Almost every Australian employer must report through STP, regardless of size. This includes sole traders, partnerships, companies, and trusts with at least one employee. There's no employee-count threshold anymore — even a business with a single part-time staff member is required to comply.
Closely held payees — such as family members of a family business who aren't paid at arm's length — have some flexibility and can report quarterly instead of each pay run, but they still need to be captured within STP.
What is the difference between STP Phase 1 and Phase 2?
STP Phase 1, introduced in 2018, reported total gross pay, tax withheld, and superannuation guarantee amounts. STP Phase 2 expanded this significantly and is now mandatory for all employers. Under Phase 2, you must report:
- A disaggregated breakdown of gross pay — overtime, bonuses, commissions, allowances, and paid leave reported as separate line items rather than one lump figure
- Income type (such as salary and wages, working holiday maker, or closely held payee)
- Employment basis (full-time, part-time, casual)
- Reason for ending employment, where applicable
The upside of the extra detail is that it removed the need for separate Tax File Number declarations and employment separation certificates in many cases, since the ATO already has that data from your STP reports.
How often do I need to report through STP?
You must submit an STP report on or before each payday, using STP-enabled software such as Xero, MYOB, or QuickBooks. There's no need to issue employees a paper payment summary at year end — instead, you finalise your STP data (usually by 14 July) and employees can view their income statement through myGov, ready for their own tax return.
How do I set up STP reporting for my business?
Setting up STP generally involves:
- Choosing STP-enabled payroll software appropriate to your business size — most cloud accounting platforms include it standard
- Connecting your software to the ATO via your registered agent number or your own ABN, depending on who's lodging
- Entering correct employee details, including income types and employment basis, so Phase 2 fields report accurately
- Running a test pay to confirm the report transmits correctly before your first live payday
If you're a micro employer (four or fewer employees) without existing software, low-cost or no-cost STP solutions are available — the ATO maintains a list of these on its website.
What happens if I don't comply with STP?
Non-compliance can result in failure-to-lodge penalties, although the ATO has generally taken an educative, supportive approach for small businesses genuinely trying to get set up. The bigger practical risk is downstream: if your STP data is wrong or incomplete, employees' income statements won't match their actual pay, which can delay their tax returns and create reconciliation headaches for you at year end.
How does STP interact with superannuation and BAS?
STP reports your PAYG withholding obligations, which feed into your Business Activity Statement. It also reports the super guarantee amounts you owe, which the ATO can use to follow up unpaid super — so accurate, on-time STP reporting is now closely tied to your broader compliance position, not just payroll administration.
Getting payroll and STP set up correctly from the start saves significant time at tax and BAS time. The Metier Group's bookkeeping services include payroll processing and STP compliance for Perth businesses. Contact us to get your payroll set up properly.