What Is Single Touch Payroll?
Single Touch Payroll (STP) is a mandatory Australian Government reporting system that requires employers to report payroll information to the Australian Taxation Office every time they process a pay run. This includes employee salaries and wages, Pay As You Go (PAYG) withholding amounts, and superannuation contribution details.
STP has fundamentally changed how payroll information flows between employers and the ATO. Rather than submitting annual payment summaries at the end of the financial year, employers now report this data in real time with every pay cycle. At Trinity Accounting Practice, we help businesses across Sydney and Australia set up, manage, and stay compliant with their STP obligations.
Who Must Comply with STP?
STP became mandatory for employers with 20 or more staff from 1 July 2018, and was extended to all Australian employers — regardless of size — from 1 July 2019. This includes sole traders who employ staff, companies, partnerships, and trusts with employees. There are no exemptions based on business size or industry.
If you employ even one person, you must report through STP. Businesses in industries such as hospitality, retail, and trades and construction often have large or fluctuating workforces, making accurate STP reporting particularly important.
STP Phase 2 — Expanded Reporting Requirements
From 1 January 2022, STP Phase 2 introduced expanded reporting requirements that provide the ATO and Services Australia with more detailed payroll information. Under Phase 2, employers must now report disaggregated gross amounts, breaking down payments into specific categories rather than reporting a single gross figure.
This includes separately reporting gross salary and wages, paid leave, allowances (broken down by type), overtime, directors fees, salary sacrifice amounts, and lump sum payments. Employers must also report income types (such as salary and wages, closely held payees, working holiday makers, or labour hire) and employment conditions (such as full-time, part-time, or casual).
The additional detail under Phase 2 helps Services Australia assess eligibility for income support payments such as Family Tax Benefit and Child Care Subsidy without requiring employees to provide separate income declarations. It also reduces the need for employers to issue separate payment summaries for employment termination payments and other specific payment types.
How STP Reporting Works
Each time you run payroll, your STP-enabled software automatically transmits the payroll data to the ATO. This happens in the background as part of your normal pay run process. The data includes each employee's year-to-date gross earnings, PAYG withholding amounts, and superannuation contribution details at the current 11.5% superannuation guarantee rate for 2024-25.
Employees can then access their year-to-date tax and superannuation information at any time through their myGov account linked to the ATO. This provides employees with greater transparency over their pay, tax, and super without having to wait for end-of-year payment summaries.
It is important to understand that STP reporting does not make superannuation payments on your behalf. STP reports the amount of super you have calculated, but you must still make the actual superannuation payments to your employees' funds separately, by the quarterly due dates. Failing to pay superannuation on time can result in the Superannuation Guarantee Charge (SGC), which includes the unpaid amounts, interest, and an administration fee, and is not tax deductible.
End-of-Year Finalisation
At the end of each financial year, employers must complete an STP finalisation, which marks the payroll data as "tax ready" for employees to use in their individual tax returns. The finalisation deadline is 14 July for employers with 20 or more employees. Small employers (fewer than 20 employees) have until 30 September, although finalising by 14 July is still recommended to allow employees to lodge their returns promptly.
The finalisation process replaces the old requirement to issue PAYG payment summaries to employees. Once you finalise in your payroll software, the information is available to employees through myGov and is also pre-filled in their tax returns by the ATO.
Before finalising, it is critical to reconcile your payroll for the full year to ensure that all wages, tax, and superannuation amounts are correct. Any errors in the finalisation will flow through to employee tax returns and may require amendments later. Our bookkeeping team can assist with year-end payroll reconciliation to ensure accuracy.
Choosing the Right STP Software
You must use ATO-compliant payroll software that supports STP reporting. Spreadsheets or manual systems cannot be used for STP. We recommend Xero, which fully supports STP Phase 2 reporting and integrates payroll with your broader accounting system. This means your wages, PAYG, and superannuation data flows seamlessly into your profit and loss statements, BAS reports, and general ledger.
Other ATO-approved platforms include MYOB and QuickBooks. If you are currently using software that does not support STP Phase 2, or if you are still processing payroll manually, it is essential to upgrade as soon as possible to avoid compliance issues.
For businesses in the childcare, medical, or not-for-profit sectors, our team can help configure Xero payroll to handle the specific award conditions, penalty rates, and allowance categories that apply to your workforce.
Common STP Mistakes to Avoid
The most common STP errors we see include incorrect employee tax file number declarations, misclassified allowances under Phase 2 reporting categories, failing to report salary sacrifice arrangements separately, and not finalising on time at year end.
Another frequent issue is businesses that confuse STP reporting with superannuation payment. Submitting an STP report that shows superannuation amounts does not mean the super has been paid. You must still make the actual payment to the relevant super funds. The ATO cross-matches STP data with superannuation fund records, and discrepancies can trigger audits or SGC assessments.
If you miss an STP submission or discover an error, you can lodge a correction in your next pay run. However, repeated missed reports can result in ATO penalties. If you are having difficulty meeting your STP obligations, contact our team for assistance before the ATO initiates compliance action.
How Trinity Accounting Practice Can Help
Whether you are setting up STP for the first time, transitioning to Phase 2, or need ongoing payroll support, our team provides full STP setup and registration, Xero payroll integration and training, regular payroll processing and ATO reporting, end-of-year STP finalisation and reconciliation, and support for sole traders, small businesses, and construction companies subject to Taxable Payments Annual Report (TPAR) obligations.
Trinity Accounting Practice
Accounting Firm in Beverly Hills, Sydney
Phone: 02 9543 6804
Address: 159 Stoney Creek Road, Beverly Hills NSW 2209
Website: www.trinitygroup.com.au
Weekend and after-hours appointments available
Our Virtual CFO division, VCFO Australia, provides strategic financial management, budgeting, forecasting, and compliance support for growing businesses and not-for-profits.
Learn more about what we offer
Discover the industries we specialise in
Read more tax and accounting tips on our blog
Our mortgage brokerage division, Nexus Wealth Partners Pty Ltd, assists clients with home loans, refinancing, and business finance.
Disclaimer: Information provided on this website is intended as a general overview only and does not replace professional advice tailored to your personal circumstances.
