STP Reporting in Australia: A Complete Guide for Small Businesses

What Is Single Touch Payroll?

Single Touch Payroll (STP) is a reporting system introduced by the Australian Taxation Office (ATO) that requires employers to report payroll information — including salaries, wages, PAYG withholding and superannuation — directly to the ATO each time they process a pay run. Rather than submitting annual payment summaries at the end of the financial year, employers now send this data digitally with every pay cycle.

STP was originally rolled out in stages: from 1 July 2018 for employers with 20 or more employees, and from 1 July 2019 for all employers. Since 1 January 2022, STP Phase 2 has been mandatory, expanding the range of information reported and introducing more granular income and payment categories.

Who Needs to Report Through STP?

Every employer in Australia — regardless of size — must report through STP. This includes:

• Sole traders with employees
• Companies and partnerships with staff
• Not-for-profit organisations with paid workers
• Employers with seasonal, casual, part-time or full-time employees

If you have even one employee (including company directors who receive a salary), you are required to report through STP. Sole traders who do not employ anyone are currently exempt, though they may still choose to report voluntarily.

What Changed with STP Phase 2?

STP Phase 2 introduced several important changes that affect how employers categorise and report employee payments. The key differences include:

• Disaggregation of gross amounts — Instead of reporting a single gross amount, employers now break down payments into specific categories such as gross salary, overtime, bonuses, directors' fees, paid leave and allowances.
• Income types — Payments are now classified under specific income types like Salary and Wages, Closely Held Payees, Working Holiday Makers, and others.
• Country codes — For working holiday makers, employers must now report the employee's country of tax residence.
• Tax treatment codes — A new six-character code replaces the previous tax file number declaration-based reporting, giving the ATO a more precise picture of each employee's tax situation.
• Child support information — Garnishee and child support deductions are now reported through STP.

How STP Reporting Works in Practice

The STP reporting process is straightforward when you use compliant payroll software:

1. Run your payroll — Calculate wages, tax withholding, super and any deductions as usual through your payroll software.
2. Review the STP report — Before submitting, review the pay event report to ensure all figures are correct and employee details are accurate.
3. Submit to the ATO — Your payroll software sends the encrypted data directly to the ATO. You will receive a confirmation once the report has been accepted.
4. Correct errors if needed — If you discover a mistake after submission, you can lodge an update event through your software to amend the data.

At the end of the financial year, you will also need to submit a finalisation declaration. This confirms to the ATO that all payroll data for the year is complete and accurate. Once finalised, employees can access their income statement (which replaces the old payment summary) through myGov.

Common STP Reporting Mistakes to Avoid

Getting STP wrong can create headaches for both you and your employees. Watch out for these common errors:

• Incorrect tax treatment codes — Ensure each employee's tax-free threshold, Medicare levy and other settings are configured correctly in your payroll software.
• Misclassified income types — Allowances, overtime and leave must be categorised into the correct Phase 2 fields, not lumped under gross wages.
• Forgetting to finalise — You must submit a finalisation declaration by 14 July each year (or 30 September for closely held payees). Missing this deadline can trigger ATO follow-up.
• Not reporting director payments — Company directors who receive a salary or draw must be reported through STP, even if they are the sole employee of the business.

Choosing STP-Compliant Payroll Software

The right payroll software makes STP compliance almost effortless. When evaluating options, look for these capabilities:

• Full STP Phase 2 support with automated submission to the ATO
• Automatic calculation of PAYG withholding, super guarantee and salary sacrifice
• Built-in income type and tax treatment code mapping
• Year-end finalisation workflow
• Error detection and correction capabilities
• Employee self-service for accessing payslips and income statements

Gimbla is a free accounting platform built for Australian businesses that includes full STP Phase 2 payroll reporting. It handles the reporting automatically every time you run a pay cycle, so you can focus on your business instead of compliance paperwork.

Key STP Dates to Remember

• Each pay day — Submit your STP pay event on or before the pay date
• 14 July — Deadline for STP finalisation declarations (most employers)
• 30 September — Extended finalisation deadline for closely held payees
• Quarterly (if eligible) — Micro employers (1-4 employees) may be eligible for quarterly reporting through a registered tax or BAS agent

Summary

STP reporting is a permanent part of running a business in Australia. While it may seem like an additional burden, the right software turns it into a background process that runs automatically with each pay cycle. The key is using payroll software that is fully STP Phase 2 compliant, keeping your employee records accurate, and remembering to finalise at year-end. With those pieces in place, STP compliance becomes one less thing to worry about.