Single Touch Payroll in Australia: What Employers Need to Know

What Is Single Touch Payroll?

Single Touch Payroll, often shortened to STP, is the Australian Taxation Office reporting system that sends payroll information to the ATO each time an employer pays staff. Instead of waiting until the end of the financial year to report wages and tax withheld, employers report key payroll details through STP as part of each pay run.

For small businesses, STP is not a separate payroll process. It sits inside compliant payroll software and uses the figures already calculated for salaries, wages, PAYG withholding, superannuation and other employee payments. When payroll is set up correctly, STP reporting becomes a normal step in the pay cycle.

Who Needs to Use STP?

Australian employers generally need to report through STP if they pay employees. This includes companies, partnerships, sole traders with staff, not-for-profits and other organisations that withhold tax from employee wages. The requirement applies whether employees are full-time, part-time, casual, seasonal or closely held payees such as family members paid by a small business.

Sole traders with no employees do not report their own drawings through STP because those payments are not wages. However, once a business starts employing staff, payroll should be processed through STP-enabled software or through a registered tax or BAS agent.

What Information Is Reported?

An STP report typically includes the employer details, employee details, gross payments, PAYG withholding and superannuation liability information for the pay event. Under STP Phase 2, payroll information is reported in more detail so the ATO and Services Australia can identify the type of income being paid.

• Income type identifies whether the payment is salary and wages, closely held payee income, working holiday maker income or another reportable category.
• Disaggregated gross separates ordinary earnings from items such as paid leave, overtime, bonuses, commissions, allowances and directors' fees.
• Tax treatment codes describe how PAYG withholding has been calculated for each employee.
• Deductions and salary sacrifice are reported in the relevant STP fields instead of being hidden inside a single net amount.

How STP Works During a Pay Run

1. Enter or import timesheets and confirm ordinary hours, leave, overtime, allowances and any one-off payments.
2. Review payroll calculations including gross pay, PAYG withholding, superannuation and deductions.
3. Submit the STP pay event through compliant payroll software on or before the pay date.
4. Keep payroll records so amounts can be checked, corrected and finalised at year end.

If a mistake is discovered after lodgement, the employer can usually correct it in the next pay event or lodge an update event through the payroll system. The right correction method depends on the type of error and when it is found.

Year-End Finalisation

At the end of the financial year, employers need to make a finalisation declaration through STP. This tells the ATO that the reported payroll information is complete for the year. Once finalised, employees can access their income statement through myGov and use it for their tax return.

For most employers, finalisation is due by 14 July after the end of the financial year. Closely held payees may have a later finalisation deadline, but businesses should confirm their obligations before relying on an extension.

Common STP Mistakes

• Using the wrong income category for directors, closely held payees or working holiday makers.
• Combining payments incorrectly instead of separating overtime, leave, allowances and bonuses into the correct Phase 2 fields.
• Submitting without checking employee details, especially tax file number information, date of birth, address and employment basis.
• Forgetting finalisation, which can delay employee income statements and create ATO follow-up.
• Leaving old payroll settings in place after changes to awards, tax settings, salary sacrifice arrangements or superannuation details.

How to Make STP Easier

The simplest way to manage Single Touch Payroll is to keep payroll, employee records and accounting data in one connected system. That reduces double entry, keeps wage expenses aligned with financial reports, and makes corrections easier when payroll information changes.

Good STP software should support Phase 2 reporting, calculate PAYG withholding and superannuation, handle leave and allowances, produce payslips, lodge pay events and guide the employer through year-end finalisation. It should also make payroll reports easy to review before anything is submitted.

Gimbla is built for Australian small businesses and includes payroll tools for STP Phase 2 reporting, PAYG withholding, superannuation and accounting workflows in one platform.

Summary

Single Touch Payroll is more than an ATO lodgement requirement. It is the framework that connects everyday payroll processing with tax, superannuation and employee income reporting. Small businesses that keep payroll records accurate, use STP-compliant software and complete year-end finalisation on time can make STP a routine part of business rather than a recurring compliance scramble.