What is Single Touch Payroll (STP)? Everything you need to know
All small businesses need to be STP-compliant from July 2019. Single Touch Payroll (STP) Phase 2 has since been rolled out.
What does this mean for you? Read our small business-friendly guide to STP below. Check out the information on STP below and our handy guide to STP 2 to ensure your business stays up-to-date with legal requirements.
What is Single Touch Payroll (STP)?
Single Touch Payroll (STP) is a way of reporting tax and superannuation to the Australian Taxation Office (ATO). It was implemented to streamline how businesses report payroll information.
Every Australian business with employees, regardless of size, must follow the STP reporting format.
How does Single Touch Payroll work?
Employers will need to be using either an approved accounting or payroll software, like Payroller. Every time they complete a pay run, the tax and super information will be sent digitally to the ATO.
Essentially, the employer will continue to run their payroll as normal. Their STP-enabled software provider will send the information that the ATO needs to them. A registered tax or BAS agent may also handle your STP reporting.
STP reports will be matched to the ATO’s employer and employee records.
Through the ATO’s online services, the employee will be able to find their year-to-date tax and super information. The data will be updated with every STP report. Previously, it was only recorded at the end of the financial year.
What does STP mean for small businesses in Australia?
The ATO started STP to monitor super liability. Reports will also be sent in from super funds and inform the ATO when payments have been made. This was brought in to ensure that employees were receiving their full entitlements.
There will no longer be a required payment summary given to employees for what has been reported through STP. Once finalised, employees can use the information provided by the ATO online to lodge their income tax returns.
Payment summary annual reports are also no longer needed for payments reported through STP.
At the end of each financial year, you’ll need to finalise your STP data to show that you have completed your reporting for the year.
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What are the STP reporting requirements?
For each employee, except for contractors, your STP report needs the following requirements:
- Salaries and wages
- Superannuation contributions
- PAYG (Pay as You Go) tax
- Your ABN (Australian Business Number)
- Details on employees who didn’t receive a payment for a specific period, but were reported earlier in the financial year
What are the benefits of STP?
STP benefits for employers
- Streamlined reporting: Instead of needing to send multiple reports every year, your business can save time and resources by only reporting payroll information with each pay run.
- Reduced paperwork and errors: Thanks to ATO-compliant payroll software, the STP reporting process is automated and requires less manual data entry.
- Better compliance: STP reporting standards and requirements help businesses comply with tax regulations, minimising penalties and fees.
STP benefits for employees
- Accurate tax returns: Employee tax returns are pre-filled with income and superannuation information from STP reports.
- Information accessibility: STP makes employees’ year-to-date pay information readily available through the MyGov portal.
- Greater transparency: With easy access to payroll information, employees will have an easier time fostering trust and confidence in their employers.
How can you get on top of STP?
To stay compliant with ATO requirements, you will need to find STP-compliant software such as Payroller or check that your current payroll provider is STP-compliant.
It’s a good idea to inform your staff of STP and how it will affect payroll for your type of business.
It also is a good time to check that you’re paying your staff correctly and that you’re on top of your super entitlements.
The ATO has provided a checklist for employers to help them through the change.
If you’re still unsure, we recommend getting in contact with the ATO or your accountant.
Learn more about Single Touch Payroll (STP)
Curious to know more about STP? Find out everything you need to know about STP Phase 2 in our guide.
Try out Payroller for free today. Our cloud payroll is ideal for Australian employers who need simple payroll for any industry.
Frequently asked questions about Single Touch Payroll (STP)
What is the difference between STP Phase 1 and Phase 2?
STP has undergone two phases:
Phase 1 (July 2018): This initial phase focused on reporting essential information like salaries, wages, PAYG withholding tax, and superannuation contributions.
Phase 2 (January 2022): This expanded phase introduced additional reporting requirements, including:
- Detailed breakdown of tax and super details for each employee payment type (e.g., salary, leave pay, bonus)
- Hours worked (for specific employee categories)
- Leave information (for specific employee categories)
How often do I need to report STP?
Businesses are required to report STP information with each pay cycle. This means submitting data on or before the actual payment date for your employees.
How do I set up STP reporting?
Setting up STP will require STP-enabled software. First, you’ll need to inform the ATO which software you’ll be using to report payroll information. Next, employee information and payroll data need to be configured into the software. This information is automatically formatted into the required STP format.
After each pay run, you should be able to finalise STP on the software you use. For detailed instructions and resources for more specific circumstances, visit the ATO website.
What is the penalty for Single Touch Payroll?
STP reporting has deadlines and data quality standards. If you fail to comply with STP requirements, you may get administrative penalties from the ATO. The penalty amount will depend on the severity and frequency of the non-compliance.
Who is exempt from STP?
Most businesses are required to do STP reporting, except for the following:
- Microbusinesses with an annual GST less than $100,000, only if they don’t pay any salaries or wages
- Employers with eligible foreign residents who are not Australian tax residents
- Entities like religious institutions and charities
Do sole traders need to do STP?
Yes, sole traders with employees must comply with STP reporting, even if the sole trader is the only employee.