Single Touch Payroll

The Australian Government has introduced Single Touch Payroll (STP), a simplified method for reporting payroll information to government agencies. But what exactly is STP? This article is about Single Touch Payroll in Australia. I’ll explore its importance, the benefits it brings, and how it actually works.

Single Touch Payroll (STP) is a new way of reporting tax and superannuation information to the Australian Taxation Office (ATO). With STP, employers can report their employees’ salaries, wages, Pay As You Go (PAYG) withholding, and superannuation liability information directly to the ATO each time they pay their employees.

To comply with the STP requirements, employers must ensure that their payroll systems are up-to-date and capable of transmitting payroll data to the ATO. Many employers will need to upgrade their existing systems or invest in new ones to meet these obligations.

Failing to comply with STP can result in penalties and fines from the ATO. It is important for employers to take proactive steps to ensure that their payroll systems are STP-compliant before the end of the 2023-2024 financial year.

Single Touch Payroll (STP) has revolutionized the way employers report employee pay, tax withholdings, and superannuation contributions to the Australian Taxation Office (ATO). By using payroll software, businesses can now submit their payroll data to the ATO each time they authorize a pay run. This  integration streamlines the reporting process, ensuring it is timely, accurate, and efficient.

In certain exceptional circumstances, employers may be eligible to apply for an exemption from STP reporting. This may apply to small businesses with 19 or fewer employees who:

STP helps employers to  simplify their payroll reporting obligations while maintaining compliance with the ATO’s requirements. This innovative approach not only saves time and resources but also enhances the accuracy and transparency of employee compensation and tax-related data.

Under the Single Touch Payroll (STP) system, employers are required to report various types of payments made to employees, along with the corresponding amounts withheld. These include:

What do Employers Include in STP Reports

Under the Single Touch Payroll (STP) system, employers are required to report various types of payments made to employees, along with the corresponding amounts withheld. These include:

When it comes to calculating Single Touch Payroll (STP) reporting,  account for all employees within your organization, regardless of their employment status. This means that your payroll reporting should encompass a wide range of employee types, including:

It’s important to note that while all these categories of employees need to be included in your STP reporting, you are not required to report payments made to contractors through STP. Contractors are considered separate from employees and have different tax and superannuation obligations.

By ensuring that all relevant employee types are accounted for in your STP calculations, you can accurately report payroll information to the Australian Taxation Office (ATO) and maintain compliance with regulatory requirements.

By implementing STP Phase 2, the reporting workload for employers who need to share employee information with multiple government bodies will be rationalized. 

It is mandatory for all employers, regardless of size, to act in accordance  with the STP Phase 2 reporting requirements.

The new fields to be captured under STP Phase 2 include details such as employment basis, paid leave, allowances, overtime, cessation details, salary sacrifice, lump sums, and country codes. Employers will also need to provide a breakdown of the components contributing to the gross amount, including bonuses, directors’ fees, paid leave, salary sacrifice, overtime, and allowances, as part of the reporting process.

STP offers several benefits to both employers and employees:

1. Streamlined Reporting: STP simplifies the reporting process for employers, making it more efficient. It eliminates the need for employers to report employee payments separately, as the information is sent to the ATO at the same time the employer pays their employees.
2. Real-Time Information: Employees can see their year-to-date tax and super information in real-time. It helps them to better manage their finances.
3. Reduced Errors: By automating the reporting process, STP reduces thechance of errors that can occur with manual data entry.

Before the introduction of Single Touch Payroll (STP), businesses would finalize their payroll records at the end of each financial year and generate two summary reports for the Australian Taxation Office (ATO). These reports included:

1. The payment summary annual report, which stated

2. The payment summary for each employee, which stated

However, with the implementation of STP-enabled software, employers no longer need to prepare payment summary annual reports. Instead, they update the ATO with each payroll run. Employers only need to notify the ATO when they make the final payroll run of the financial year to finalize their STP data.

Furthermore, employers using STP are not required to provide employee payment summaries. 

The ATO makes the employee’s income statement available to them via myGov and notifies them when it is ‘tax ready’ for their tax return.

This  process combines pay runs and payroll into a single, efficient system, reducing the administrative burden on businesses and timely reporting to the ATO.