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What is Single Touch Payroll? | Understand STP & How it works

The Australian Government developed Single Touch Payroll (STP) to reduce employers' reporting burdens to government agencies.

Learn what STP is, the key dates for STP, how STP works for employers and employees, reporting and how to comply.

The Access Blog
7 minutes

Posted 25/11/2022

What Is Single Touch Payroll? 

The Single Touch Payroll (STP) system automates the transmission of employee information to the Australian Tax Office. To digitise reporting from Australian businesses to government departments, STP Phase 1 was the first step. STP Phase 2 expands on digitisation, and employers must report additional information through STP on or before each payday. STP reporting includes reporting to Services Australia and other government agencies beyond the ATO.  

The information sent to the ATO includes the following: 

  • Salary or wages paid to an employee 
  • A company's director's remuneration 
  • Individuals receiving a return-to-work payment 
  • Employee termination payments 
  • Payment for unused leave 
  • Pay for parental leave 
  • Seasonal Labour Mobility Program payment to an employee 

Under STP reporting, an employer can also send the ATO the following non-mandatory details: 

  • Contributions to superannuation by employers that are reportable. 
  • Reportable fringe benefits for employees. 
  • Payment made to a contractor outside payroll (payments made to contractors through payroll must be reported via STP). 

Key dates for STP reporting:  

1 July 2018 - STP is mandatory for employers with more than 20 employees. 

1 July 2019 - STP reporting is mandatory for all employers, with exceptions for STP micro employers. 

1 July 2021 - Employers with a Withholding Payer Number (WPN), such as carers, must report STP.  

1 January 2022 - STP Phase 2 reporting started.  

How does STP work for employers? 

Reporting tax and super information under STP is mandatory for all employers. When an employer pays its employees, the ATO must receive their salary, wage, PAYG, and superannuation details. 

There are several ways to report STP: 

  • The employer reports STP via STP-enabled payroll software directly to the ATO. 
  • An accountant or bookkeeper can act as the employers' external service provider and manage the STP reporting on the employers' behalf. 
  • Payroll outsourcing can manage an employer's STP reporting.  

Concessional reporting 

Some concessional reporting options are available to help employers transition to STP reporting. Employer eligibility is dependent on circumstance.  

Concessions are available for:  

  • Micro employers 
    • Employers of 4 employees or fewer 
  • Closely held payees 
    • An individual who receives payments from a closely held entity is considered a closely held payee.
    • For example:
      • Family members of a family business. 
      • Directors or shareholders of a company. 
      • Beneficiaries of a trust. 
    • A company that employs 'inbound assignees’ 
      • The employees of multinational companies may be transferred from one affiliate to another within a different tax jurisdiction. The purpose of this is for business and commercial purposes. These employees are referred to as 'inbound assignees'. 

How does STP work for employees? 

The ATO makes STP information readily available to employees via MyGov. Accountants, or the registered agents that complete tax returns, will also have access to the STP data once the EOFY finalisation has been completed.  

What this means for employees:  

  • Superannuation, income, and tax payments are available in real-time via MyGov. 
  • Payroll information is pre-filled into the employee's tax return, and employees no longer need to wait for a payment summary. STP simplifies and speeds up the tax return process for employees. 
  • Tax File Number Declaration and SuperChoice forms are readily available.

Benefits of STP 

Online banking, shopping, bookings, and doing business are all routine activities for most Australians. STP aligns government reporting with the digital age. 

Some of the key benefits of STP are:  

  • PAYG payroll report (STP report) is combined with the pay run. ATO receives payroll information every pay run instead of once a year in July; this saves employers time at the end of the financial year. 
  • By pre-filling W1 and W2 in your BAS, the ATO eliminates potential errors and saves the employer time.  
  • The ATO no longer requires employers to process payment summaries, part-year payment summaries or submit end-of-year reporting at the end of the year. 
  • With STP reporting, MyGov provides employees with their year-to-date super information.  
  • The onboarding of new employees is streamlined as the Tax File Number Declaration and Super details are readily available.  

When is STP not required? 

Contractor payments are not mandatory to report through STP.  

The recommendation is that employers continue reporting contractors' payments using their payroll solution under STP if they do this today. 

The employer does not need to provide a payment summary to contractors if the employer reports payments to them and withholding is applied voluntarily. 

Accounts payable payments made to contractors outside of payroll do not need to be reported under STP. 

Certain scenarios do not require STP reporting, including:  

  • The company no longer has employees. 
  • The company has ceased trading. 
  • The company has changed its structure. 
  • There are no more employee payments for the rest of the year. 
  • As a result of COVID-19, the business has paused. 

Visit the ATO website for more information. 

When STP reporting can cease | Australian Taxation Office (ato.gov.au) 

How to comply with STP 

To comply with STP, employers must submit compliant reports every payday. What you need to do: 

Configuration 

  • Identify the number of employees that require STP reporting. Some employees may be excluded from the headcount; more information can be found on the ATO website.  
  • Use online payroll software like Access Definitiv which is STP reporting enabled that creates ATO-compliant reports. 

Creating & Lodging events 

Creating and lodging STP events can be straightforward with the right payroll solution, but the ATO has some resources to help you get set up for success before you get started.  

  • Get ready checklist – includes the initial steps, such as choosing how you will report through STP. 
  • Start reporting checklist – this will help you take the right steps before sending your first STP report to the ATO. 

EOFY processes 

The STP EOFY finalisation process is more complex than the lodgement process. To ensure employee payments match what is processed in payroll, payroll software, general ledgers, and ATO portals must be reconciled.  

The ATO website has some comprehensive information on End-of-year finalisation through STP. 

How Access Payroll Solutions help with STP reporting  

Making the changes necessary to provide the increased level of employee data required by STP Phase 2 has been a monumental challenge for businesses and software vendors. 

To ensure that you can report all the information required for STP reporting with ease it's important that you partner with a payroll software vendor you trust to guide you through the process of significant change.  

In 2018, The Access Group was one of the first software vendors to have its payroll solutions certified as STP compliant by the ATO. The Access Group have also been part of the ATO’s STP Phase 2 working group and has a proven track-record of delivering accurate and compliant payroll software for over 35 years.  

With our Australia-based team, we can ensure all our customers are compliant with STP Phase 2 with payroll solutions you can trust.  

For more information on how STP impacts your business download our Compliance Guide or if you want to know more about our payroll solutions Talk to one of our specialists today.