If you employ even one person in Australia, you are required to report payroll information to the Australian Taxation Office. This is where Single touch payroll becomes essential.
Many business owners first hear about Single Touch Payroll when setting up payroll for the first time or when they receive a reminder about reporting obligations. It can sound technical and complicated. In reality, it is a structured and digital way of reporting payroll information to the ATO each time you pay your employees.
Since its introduction, Single Touch Payroll has become mandatory for employers across Australia. Whether you run a small café, a growing trade business, or a company with multiple employees, the rules apply.
In this guide, you will learn:
- What it is
- How it works
- Who needs it
- Why it matters
By the end, you will clearly understand your obligations and how Single Touch Payroll fits into your payroll process.
What is Single Touch Payroll?
If payroll compliance feels confusing, many business owners start by asking, what is single touch payroll?
In simple terms, Single Touch Payroll, also known as STP, is a system that requires employers to report payroll information to the Australian Taxation Office each time they pay their employees. The program was introduced by the Australian Taxation Office in 2018 to make payroll reporting faster, more accurate, and more transparent.
To understand the STP meaning, think of it like this: instead of sending payroll information to the government once a year, businesses now send key payroll details automatically every pay cycle. This happens through STP-enabled payroll software. When you process wages, the information is digitally reported to the ATO at the same time.
The main purpose of STP is real-time payroll reporting. It helps the ATO receive up-to-date information about employee payments throughout the year. This reduces errors, improves compliance, and removes the need for separate end-of-year payment summaries in most cases.
So, what information is reported under STP?
Each time you run payroll, your system reports:
- Salaries and wages paid to employees
- PAYG withholding amounts
- Superannuation liability
Salaries and wages include regular pay, bonuses, overtime, and allowances. PAYG withholding refers to the tax you deduct from employee wages and send to the ATO. Superannuation liability means the super amounts you owe for your employees, even if they are paid to super funds later.
In very simple words, STP = reporting employee payroll data to the ATO every pay cycle.
It does not mean you are paying tax or super every time you run payroll. It simply means you are reporting the figures at the same time you pay your staff.
Today, STP applies to most Australian employers, regardless of business size. Whether you have one employee or a growing team, STP ensures payroll information is shared accurately and on time.
For business owners, understanding what is single touch payroll helps remove confusion. It is not an extra payroll task. It is a smarter way of reporting what you are already paying.
Why Was Single Touch Payroll Introduced?
The introduction of Single Touch Payroll was part of a broader digital transformation of Australia’s tax system.
Before STP, employers reported payroll information annually. This created delays and sometimes errors. The ATO only received complete information after the financial year had ended.
The system was introduced to:
- Reduce underreporting of wages: Real time payroll reporting ensures wages are recorded and submitted each pay cycle, reducing opportunities for businesses to underreport employee earnings and allowing discrepancies to be identified much earlier than under annual reporting systems.
- Increase transparency: Regular digital reporting creates a clear and consistent record of salaries, PAYG withholding, and superannuation liabilities, improving visibility for regulators and giving employees greater confidence that their pay and tax details are accurately documented.
- Improve superannuation compliance: By reporting superannuation liabilities every pay cycle, the system helps the ATO detect unpaid or underpaid super sooner, encouraging employers to meet obligations on time and reducing long term super shortfalls for employees.
- Streamline tax reporting: Integrating payroll reporting with each pay run reduces manual paperwork, removes many end of year reporting tasks, and simplifies compliance processes, making tax reporting more efficient and less administratively burdensome for businesses.
- Prevent wage theft: Frequent digital reporting strengthens oversight of payroll data, making it harder to hide underpayments or incorrect tax withholding and supporting fair workplace practices through improved accountability and ongoing regulatory monitoring.
Real time reporting gives the ATO better visibility into employer payroll activity. This helps identify unpaid superannuation and incorrect PAYG withholding sooner rather than later.
For employees, it improves clarity. They can see up to date income information throughout the year instead of waiting for a payment summary.
For the government, it modernises payroll reporting. It reduces paperwork and supports a more efficient tax system.
For businesses, it creates a more structured and automated reporting environment. Although mandatory, it simplifies year end reporting and reduces duplication.
Single Touch Payroll supports accuracy and accountability without increasing tax obligations.
Is Single Touch Payroll Compulsory in Australia?
A common question is, is single touch payroll compulsory?
Yes. Single Touch Payroll is compulsory for all employers in Australia. If you pay employees, you are legally required to report payroll information through STP. This requirement applies regardless of business size, industry, or structure.
Since 1 July 2019, all employers must report payroll data to the Australian Taxation Office using STP-enabled software. The system was initially introduced in stages, but from that date onward it became mandatory for every employer across the country.
STP reporting applies to payments made to:
• Full-time employees
• Part-time employees
• Casual workers
If you process wages for any of the above categories, reporting through STP is required. It does not matter whether employees work regular hours or irregular shifts. If they are on your payroll, they are covered.
Micro employers are also included. Even if you have only one or two employees, STP obligations still apply. There is no exemption based solely on having a very small team.
In recent years, STP Phase 2 expanded the reporting framework. This update introduced more detailed income categories and additional data fields. The purpose was to improve income reporting accuracy and reduce duplication across government systems. While Phase 2 added more reporting detail, it did not change the core requirement that employers must report each pay cycle.
There are penalties for non-compliance. However, the ATO generally takes a supportive approach where businesses are making genuine efforts to meet their obligations. Assistance and guidance are available, especially during transitions to updated reporting requirements.
Limited exemptions exist in specific circumstances, such as certain closely held payees or employers in remote areas without reliable internet access. These cases are uncommon and usually require formal approval.
For most businesses, the position is clear. If you employ staff and run payroll, STP reporting is compulsory.
How Does Single Touch Payroll Work? (Step by Step)
Understanding how does single touch payroll work helps remove confusion and makes compliance feel more manageable. The process follows a clear structure and is built into your normal payroll routine. It does not require a separate reporting system outside of your usual pay cycle.
Step 1: Process Payroll
You begin by running payroll as you normally would. This includes calculating:
• Gross wages
• PAYG withholding
• Super contributions
Gross wages include ordinary hours, overtime, bonuses, and allowances. PAYG withholding is the tax amount deducted from employee pay. Super contributions refer to the superannuation amounts you owe for eligible employees.
This is the same payroll calculation process you already follow. STP does not change how you calculate pay. It changes how that information is reported.
Step 2: Generate STP Report
Once payroll calculations are complete, your STP-enabled payroll software automatically prepares the STP report. The system uses the data from the pay run and compiles it into the required reporting format.
You do not need to manually create a separate report. There is no need to log into a different portal or complete additional forms. The reporting function is built into the payroll software and happens as part of the process.
Step 3: Submit Report to ATO
After you finalise the pay run, the software sends the STP report digitally to the Australian Taxation Office. This submission happens at the time of the pay run or shortly after it is completed.
The report includes salary and wage amounts, PAYG withholding, and superannuation liability information for that pay cycle.
Step 4: ATO Confirms Receipt
Once the report is successfully lodged, the ATO sends a confirmation message back through your payroll software. This confirmation shows that the submission has been received and processed. If there is an error, the system will notify you so it can be corrected.
Step 5: Employees Access Data via myGov
Employees can log into their myGov account to view updated payroll information. They can see:
• Year-to-date income
• Tax withheld
• Super information
This allows employees to track their earnings and tax details throughout the financial year.
The overall flow looks like this:
Payroll → Software → ATO → Employee Visibility
The employer processes payroll. The software prepares and sends the report. The ATO receives the data. Employees gain visibility through their online account. There is no need to issue separate annual payment summaries in most cases, as the information is available digitally throughout the year.
What is STP Reporting?
Many employers ask, what is STP reporting and how is it different from older reporting methods?
STP reporting refers to reporting payroll information to the Australian Taxation Office every time you pay your employees. Instead of waiting until the end of the financial year, payroll data is sent to the ATO during each pay cycle. This includes salary and wage amounts, PAYG withholding, and superannuation liability details.
Each pay event is reported digitally through your payroll software. When you finalise a pay run, the software automatically prepares the required data and submits it electronically. There is no need to complete a separate manual form. The reporting process is built into your normal payroll workflow, making it part of the standard pay cycle rather than an additional task.
At the end of the financial year, you complete a finalisation declaration. This confirms that all payroll information reported during the year is accurate and complete. Once finalised, the data becomes the official year end record for each employee and replaces the need to issue separate annual payment summaries in most cases.
Under the old system, employers issued annual PAYG summaries, commonly known as group certificates, to employees. Employers would also lodge an annual report with the ATO. This meant payroll information was largely reconciled at year end, which often increased administrative pressure during that period.
Under STP reporting:
• There are no more group certificates
• Income information is updated throughout the year
• Employees access income statements online
• The finalisation process replaces traditional payment summaries.
Employees can view their year to date income and tax details online as the year progresses instead of waiting until July for a summary document.
Instead of submitting one large annual report, employers now report regularly throughout the year. This spreads reporting across each pay cycle rather than concentrating it at year end, reducing pressure and keeping payroll records aligned with reported data.
What is STP Phase 2?
STP Phase 2 was introduced from January 2022 onwards as an expansion of the original Single Touch Payroll framework. It increased the level of payroll detail that employers must report to the Australian Taxation Office. The update focused on improving data accuracy and strengthening compliance reporting.
This phase requires:
• More detailed income categories: Employers must now classify payments into specific income types rather than reporting broad totals. This includes separating ordinary earnings, overtime, bonuses, allowances, commissions, and different types of paid leave.
• Disaggregation of gross income: Instead of reporting one combined gross amount, businesses must break total earnings into clearer components. This provides greater transparency around how employee income is structured and reported.
• Reporting of child support garnishees: Certain payroll deductions, such as child support garnishees, must be identified separately. This ensures accurate reporting to the relevant government agencies and supports correct allocation of withheld amounts.
• Additional employment conditions: Employers may need to report extra details about employment arrangements, such as income stream types or specific payment classifications. This improves data consistency across government systems.
STP Phase 2 does not introduce new taxes. It increases reporting detail, not additional tax. Pay rates and tax rates remain unchanged. The purpose is to improve data sharing between government departments and reduce the need for employees to provide duplicate information when accessing services.
For businesses, compliance means ensuring payroll software is updated and correctly configured to meet Phase 2 requirements. While reporting is more detailed, the core payroll process remains the same.
Who Needs to Use STP?
Single Touch Payroll is mandatory for almost all Australian employers. If a business has employees and processes payroll, STP reporting is required. The size of the business does not matter.
Who must use STP?
All employers who pay salaries and wages to employees must report through STP. This includes:
- Companies registered with ASIC
- Trusts that employ staff
- Sole traders with employees
- Partnerships with employees
- Not-for-profit organisations with staff
Even if there is only one employee, STP still applies. For example, a café owner with three staff must report wages, PAYG withholding, and superannuation through STP every time payroll is processed.
If a sole trader hires a part-time assistant, they must also comply. The legal structure of the business does not change the obligation. What matters is whether wages are paid to employees.
Who may not need STP?
There are limited exceptions.
- Closely held payees may have special reporting rules. These are usually family members working in a closely held trust or family company. Reporting can sometimes be done quarterly instead of every pay run.
- The ATO may grant exemptions in very specific circumstances, such as no internet access in remote locations.
If a consultant only pays independent contractors and has no employees, STP is generally not required. For example, a consultant paying contractors only does not need to report through STP, provided there are no employees on payroll.
In simple terms, if wages are paid to employees, STP applies.
Benefits of Single Touch Payroll for Businesses
Although mandatory, Single Touch Payroll offers practical advantages.
Reduced paperwork: Single Touch Payroll significantly reduces manual paperwork. Traditionally, businesses needed to prepare payment summaries, annual reports, and separate superannuation statements at the end of the financial year. With STP, payroll data is reported digitally each pay cycle. This eliminates duplicate data entry and reduces the risk of misplaced documents, saving both time and administrative effort.
Automatic reporting: Each time payroll is processed, salary, wages, PAYG withholding, and superannuation information is automatically sent to the Australian Taxation Office, simplifying STP accounting and reducing administrative workload. This real-time reporting ensures that data is always current and aligned with government records. Businesses no longer need to compile large batches of payroll data at year end because reporting occurs progressively throughout the year.
Improved compliance: Because STP requires payroll data to be submitted regularly, it encourages businesses to maintain accurate and up-to-date records. Errors are identified earlier rather than months later. This ongoing reporting structure reduces the likelihood of non-compliance penalties and supports stronger governance practices.
Less end-of-year admin: End-of-financial-year tasks become far simpler. Employers do not need to issue traditional payment summaries. Instead, they finalise their STP data, and employees can access their income statements through their online government accounts. This streamlined process reduces administrative pressure during busy reporting periods.
Greater payroll accuracy: Regular reporting promotes disciplined payroll processing. Automated calculations and system validations help minimise common errors in tax withholding and superannuation contributions.
Transparency with employees: Employees can view their year-to-date income, tax, and superannuation details throughout the year. This visibility builds trust and reduces payroll-related queries, improving overall workplace transparency.
Single Touch Payroll supports a more structured payroll system. Over time, businesses benefit from smoother reporting processes and fewer last minute corrections.
Common STP Mistakes Businesses Make
Single Touch Payroll is designed to simplify reporting, but small oversights can create unnecessary stress. The good news is that most mistakes are easy to prevent once businesses understand where issues typically arise.
Late submissions: Some businesses delay STP reporting because payroll is busy or approvals take longer than expected. However, STP reports must be lodged with each pay run. Even short delays can trigger reminders from the Australian Taxation Office. Setting automated reminders or using payroll software that lodges reports automatically can solve this quickly.
Incorrect employee details: Simple data entry errors such as incorrect TFNs, misspelled names, or wrong dates of birth often cause reporting rejections. These errors usually happen during onboarding. A quick review process when adding new employees helps avoid future corrections.
Not finalising at EOFY: At the end of the financial year, employers must finalise STP data so employees can access accurate income statements through myGov. Some businesses forget this finalisation step, assuming regular reporting is enough. Scheduling EOFY payroll reviews ensures everything is properly declared.
Using non-compliant software: Not all payroll systems meet STP reporting standards. Using outdated or non-compliant software can result in failed submissions. Choosing an STP-enabled solution keeps reporting aligned with ATO requirements.
Confusion between STP and BAS: STP reports payroll data, while Business Activity Statements handle GST, PAYG withholding, and other tax obligations. They are connected but separate processes. Understanding this distinction helps businesses avoid duplicated or missed reporting.
With the right systems and simple checks in place, STP reporting becomes routine rather than stressful.
Do You Need Special Software for STP?
Yes. You must use STP enabled payroll software.
You cannot manually email reports to the ATO or submit paper forms.
The software must be ATO compliant and capable of generating and transmitting STP reports digitally.
Most modern cloud payroll systems include:
- Automated STP reporting
- ATO submission features
- Integration with accounting systems
- Secure digital record keeping
Choosing the right payroll solution ensures smooth reporting and compliance with both STP and STP Phase 2 requirements. For businesses seeking guidance on payroll compliance and digital reporting, working with experienced professionals can simplify the process and ensure everything is set up correctly from the start.
For a streamlined payroll experience, Myaccountant offers Mypayroll. From STP setup to accurate reporting and ongoing compliance support, MyPayroll helps your business stay on track. Visit Myaccountant today and simplify payroll with confidence.
Start with a 30-day free trial of Mypayroll and see firsthand how effortless payroll management can be.
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