What Is Single Touch Payroll & How Does It Work?

Single Touch Payroll (STP) is an Australian government initiative that changed how employers report payroll information to the Australian Taxation Office (ATO). It streamlines reporting obligations for businesses. The system ensures employee salary and wage information, Pay As You Go (PAYG) withholding, and superannuation contributions are reported directly to the ATO with each pay cycle.

Understanding Single Touch Payroll

Single Touch Payroll changed payroll reporting in Australia by moving from annual summaries to real-time digital submissions. Employers must use compliant payroll software to send this data to the ATO every time they process payroll. This continuous reporting enhances transparency for the tax authority and employees regarding their earnings and entitlements. The system aims to simplify compliance, reduce administrative burdens, and provide a more accurate overview of payroll data.

How STP Operates

Single Touch Payroll involves data flowing from an employer’s payroll software directly to the ATO. When an employer processes a pay run, the STP-enabled software automatically transmits the required information securely. This includes gross pay, Pay As You Go (PAYG) withholding, and superannuation liability for each employee. The data is sent as a “pay event” each time employees are paid. This process ensures the ATO receives up-to-date payroll details, eliminating the need for employers to issue annual payment summaries to employees.

Who STP Applies To

Single Touch Payroll is a mandatory reporting requirement for all Australian employers. The implementation was phased, initially becoming compulsory for larger employers from July 1, 2018. Subsequently, the requirement extended to all small employers from July 1, 2019. When determining the employee count for STP purposes, businesses must include full-time, part-time, casual, and overseas-based employees, as well as those on paid or unpaid leave.

Employer Responsibilities

Employers using Single Touch Payroll must utilize STP-enabled payroll software that meets the ATO’s specifications. Accurate data entry and record-keeping are essential for compliance. If errors are identified after a submission, employers are responsible for making corrections or amendments through their software. Finalization of payroll data through STP is required at the end of the financial year, typically by July 14. This finalization confirms that the employer has fully reported for the financial year for each employee. Once finalized, employees can access their “tax ready” income statements directly from the ATO through their myGov accounts, which replaces the traditional payment summary.