PAYG
Single Touch Payroll (STP)
Single Touch Payroll is the ATO reporting system in which employers send payroll information, such as wages, tax withheld and super, to the ATO each time they pay their staff.
Single Touch Payroll, or STP, is a reporting method that requires employers to send salary and wage information to the ATO electronically every time they run payroll. The report includes gross payments, PAYG withholding and super liabilities for each employee. It is generally done directly from payroll or accounting software, so it does not usually involve extra data entry.
STP began for larger employers and now applies to most employers with employees, although the rules for particular situations, such as very small employers, have changed over time and there are some exceptions. Check the ATO's current guidance to see whether you are covered and how to report. Some employers may need to report through an agent or use a software provider that is STP enabled.
For employees, STP means their information is available in their ATO online account as an income statement, which makes lodging a tax return faster. It also allows the ATO to see whether PAYG withholding and super are being reported regularly, which helps identify underpayment problems earlier. For employers, the main benefit is that you no longer need to give workers a payment summary at year end.
At the end of the financial year, the employer must make a finalisation declaration, which confirms that the information reported through the year is complete. Until this is done, employees' income statements will show as not tax ready. Finalising on time helps your workers to lodge their returns and reduces corrections. Check that the final amounts match your payroll records.
STP does not replace the BAS. You still report W1 and W2 on your activity statement, and the figures should agree with your STP data. Mismatches can prompt ATO queries. If you make a mistake in a pay event, you can usually correct it by sending an update through your software. Penalties may apply to late or missing reports, though the ATO often takes a graduated approach.
Keep payroll records for five years and review the setup if you change software. This is general information only, so confirm your STP obligations with the ATO or a registered tax professional.
Worked example
Lucy's cafe has six staff and pays fortnightly. Each pay run, her payroll software sends an STP report to the ATO showing gross pay, tax withheld and super for each employee. At the end of the year, she finalises the information. One employee, Tom, earning $48,000 with $7,000 withheld, sees a tax ready income statement in his ATO account and lodges his return within days.
Practical tips
- Make sure your payroll software is STP enabled and set up correctly before your first pay run.
- Finalise your STP information after year end so employees can lodge their returns promptly.
- Check that your W1 and W2 figures on the BAS match your STP reports.