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What is Single Touch Payroll (STP)?

a person is checking payroll on the phone

When reporting payroll activities, business owners need to be aware of Single Touch Payroll - a compliance regulation set by The ATO. In this blog, we’ll dive deeper into:

  • What Single Touch Payroll is
  • How it works
  • Changes to STP
  • STP-enabled software
  • How STP benefits businesses

What is Single Touch Payroll? 

Single Touch Payroll (STP) is an Australian Tax Office (ATO) compliance regulation, designed to help employers streamline the reporting process to the ATO and other government agencies. 

Businesses were once required to report this information annually, but now need to send a report to the ATO after each payday, in a specific digital format. The information includes the gross wage, tax details, and super of employees. 

STP was first used on the 1st of July 2018 and made mandatory for all employers since the 1st of July 2021.

Changes to STP

On the 1st of January 2022, Single Touch Payroll Phase 2 was introduced. Although this is a mandatory start date, the ATO offered a flexible approach to transition.  

Simply put, it’s an extension of Phase 1 and reduces the burden of employers having to report the information to multiple government agencies. Under Phase 2, you need to report additional information to the ATO. These changes include:

  • Tax file number declaration 
  • Employment and taxation conditions
  • Income type 
  • Country codes
  • Disaggregation of gross wages
  • Child support
  • Business management software IDs and Payroll IDs.

You can find more details on ATO’s website regarding Single Touch Payroll Phase 2.

What is STP-enabled software?

To cut out paperwork, STP can only be reported digitally via STP-enabled software.

There are many Single Touch Payroll software available on the market, and some great low-budget options cost less than $10 a month. These would be great for employers that have four (or fewer employees), or those who don’t use payroll software.​

Using bookkeeping software that includes payroll software features is one of the simplest ways to report STP, with the added benefit of managing your accounting records at the same time. 

Xero is a great option for many business owners.​ Once a pay run is processed in Xero,  the STP information can be sent to the ATO with the simple click of a button. If you need more information on how Xero works for STP, or need help setting yourself up with the software, we’re here to help.

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How does STP actually work?

  • With STP-enabled software, you can send tax and super information to the ATO each time you run the payroll
  • You run your payroll, pay your employees as normal, and send them a payslip
  • Your pay cycle does not need to change - you can continue to pay your employees weekly, fortnightly or monthly
  • Your STP-enabled payroll software will send a report to the ATO with the information they need, including salaries and wages, PAYG withholding, and super liability

How to set up STP in my business?

You first need to opt-in for STP-enabled software. Once you pick the software that works best for you, you’ll need to set it up. For example, if you choose to use Xero for Single Touch Payroll, you can follow these steps:

  • Ensure you’re set up for payroll
  • Update your organisation and employees’ details, and make sure they meet ATO’s requirements
  • Connect your Xero account with the ATO

You can find detailed information on setting up STP with Xero here

How does Single Touch Payroll benefit businesses?

Life can become more complicated for business owners when new government regulations come around. However, STP is an example of a regulation which everyone benefits from.​

STP is all about saving you time. It streamlines the reporting process, minimises human errors, eliminates time-consuming payment summaries, and provides real-time data for employees, employers, and government agencies. Ultimately, STP reduces stress for employers when reporting payroll activities, and offers peace of mind.

Who are Beany?

We’re an online accounting firm that is always right here for you, your accounting pain relief. The most advanced technology lets us work way more closely with you than a normal accountant would. ​We have a dedicated team of remote accountants to take care of your business no matter where you are, so you can focus on growing your business. We take out the ‘fluff’, break down the barriers and get things done. Looking out for you is what we are all about. Get started for free today.

Perrie Hewitt

Perrie Hewitt

Client Support, Beany Australia

I love to demystify accounting, help people achieve their goals and be the calm voice when it comes to the stressful world of running your own business. Outside of work, I am creative and love to make my own clothes, paint and write short stories.

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