Single Touch Payroll (STP) (Australia)

The Australian Taxation Office's digital payroll reporting system that requires employers to report employee wages, PAYG withholding, and superannuation information to the ATO each time they run payroll, replacing the old end-of-year reporting process.

What Is Single Touch Payroll (STP)?

Key Takeaways

  • ✓Single Touch Payroll (STP) is the ATO's digital reporting system that requires employers to send payroll data (wages, tax withheld, superannuation) to the ATO every time they process a pay run.
  • ✓STP became mandatory for all Australian employers from July 1, 2019, regardless of size (employers with 20+ employees started from July 1, 2018).
  • ✓Over 785,000 employers now report through STP, covering virtually every employed person in Australia (ATO, 2023).
  • ✓STP Phase 2 (mandatory from January 1, 2022) expanded reporting to include disaggregated gross amounts, income types, and country codes for working holiday makers.
  • ✓Payroll software handles STP transmission automatically. The employer runs payroll as normal, and the software sends the STP report to the ATO in the background.

Before STP, employers processed payroll throughout the year and then produced payment summaries (group certificates) at year-end. Employees needed these summaries to lodge their tax returns. The ATO received employer data once a year, months after the income was earned. STP flipped that model. Now the ATO receives payroll data with every pay run: weekly, fortnightly, or monthly. This gives the ATO near-real-time visibility into employer withholding and superannuation obligations. For employees, it means their income and tax information is pre-filled in their tax return from day one of tax season. For employers, the annual payment summary process is gone. STP replaced it with "finalisation" at year-end, where the employer marks the year's data as complete. The biggest shift for payroll teams wasn't technical. Most modern payroll software handles STP transmission automatically. The real change was in accuracy requirements. With annual reporting, errors could be caught and corrected before submission. With per-pay-run reporting, mistakes are visible to the ATO immediately.

2018-19Financial year STP became mandatory for employers with 20+ employees (expanded to all employers from July 2019)
785,000+Employers reporting through STP as of 2023 (ATO, 2023)
Real-timePayroll data is sent to the ATO on or before each pay day, not at year-end
Phase 2STP Phase 2 (expanded reporting) became mandatory from January 1, 2022, adding more granular data requirements

STP Phase 2: What Changed

STP Phase 2 significantly expanded the data employers must report, moving from aggregate gross figures to itemized components.

Disaggregated gross amounts

Under Phase 1, employers reported a single "gross" amount per employee per pay run. Phase 2 requires this to be broken into components: base salary, overtime, bonuses, directors' fees, paid leave (by type), allowances (by type), and lump-sum payments. This gives the ATO granular visibility into pay composition and helps pre-fill employee tax returns more accurately.

Income types

Phase 2 introduced income type codes that employers must assign to each payment. The key types are: SAW (salary and wages, the most common), CHP (closely held payees like family members in a business), IAA (inbound assignees to Australia), WHM (working holiday makers), SWP (seasonal worker programme), VOL (voluntary agreement), and LAB (labour hire). Each type has different reporting and withholding implications.

Tax treatment codes

Employers now report a six-character tax treatment code for each employee that encodes their tax status: residency (R for resident, N for non-resident, W for working holiday maker), tax-free threshold claimed (T or N), HELP debt (H, S, F, C for different loan types or X for none), tax offset claimed (T or N), Medicare Levy variation (H for half, F for full exemption, or X for none), and Medicare Levy Surcharge status. This code determines the correct withholding rate.

Setting Up STP for Your Business

Getting STP right starts with software configuration and employee data accuracy.

  • Choose STP-enabled payroll software from the ATO's list of approved solutions. Major platforms include Xero, MYOB, QuickBooks, KeyPay, and Employment Hero.
  • Connect your payroll software to the ATO using your Software ID (SID) and authenticate through myGovID (for sole traders) or Relationship Authorisation Manager (RAM) for companies.
  • Verify every employee's TFN, date of birth, address, and tax details are current. STP reports are validated against ATO records, and mismatches generate errors.
  • Map your pay categories to STP Phase 2 reporting codes. Base salary, overtime, bonuses, allowances, and leave types each need specific codes.
  • Assign the correct income type code to each employee (SAW for most employees, WHM for working holiday makers, etc.).
  • Run a test STP report before your first live submission to catch data issues. Most payroll software has a validation or dry-run feature.
  • Designate an authorized person to submit STP reports and handle ATO queries. This is usually the payroll officer or an external payroll provider.

How STP Reporting Works Each Pay Run

The STP submission is integrated into the normal payroll process. It happens automatically at the end of each pay run.

Step-by-step process

1. The employer processes the pay run in their payroll software (entering hours, leave, adjustments). 2. The software calculates gross pay, PAYG withholding, superannuation, and net pay for each employee. 3. When the employer finalizes the pay run, the software generates an STP report containing year-to-date totals for each employee. 4. The report is transmitted to the ATO via a secure API connection (Standard Business Reporting framework). 5. The ATO acknowledges receipt and validates the data. 6. If there are errors, the software displays them and the employer corrects and resubmits. 7. The pay run is complete once the STP report is accepted.

Timing requirements

STP reports must be submitted on or before the pay day. If you pay employees on Thursday, the STP report must reach the ATO by Thursday. In practice, most payroll software submits the report as soon as the pay run is finalized, which is usually a day or two before pay day. The ATO provides some flexibility for small employers (fewer than 20 employees) who may lodge up to quarterly if they use a registered tax agent.

Corrections and amendments

If you discover an error in a previous STP report, you correct it in the next pay run. STP reports contain year-to-date figures, so a correction in the current pay run automatically adjusts the cumulative totals. You don't need to go back and amend individual historical reports. For errors discovered after the financial year finalisation, you submit an update event to revise the year-to-date figures.

Year-End Finalisation

STP eliminated traditional payment summaries (group certificates). Instead, employers complete a "finalisation" process that tells the ATO the year's data is complete.

Finalisation deadline

Employers must finalise STP data by July 14 following the end of the financial year (June 30). This involves running a final STP report that marks each employee's data as "final" for the financial year. Once finalised, the employee's income statement becomes "Tax ready" in myGov, and they can lodge their tax return using the pre-filled data. Closely held payees (family members paid by a family business) have an extended deadline of September 30.

What employees see

Employees access their income statement through myGov (linked to the ATO). Before finalisation, the statement shows "Not tax ready" but displays year-to-date figures. After finalisation, it changes to "Tax ready" and the data is locked. Employees no longer receive paper or email payment summaries from their employer. If an employee needs a copy, they access it through myGov or request it from the ATO.

STP for Closely Held Payees and Micro Employers

Family businesses and micro employers have specific STP concessions that recognize their simpler payroll structures.

Closely held payees

A closely held payee is a person who is directly related to the entity that pays them (directors who are shareholders, family members in a family company, beneficiaries of a family trust). These payees can be reported quarterly rather than each pay run. The employer has three reporting options: report actual payments each quarter, report a reasonable estimate each quarter and reconcile at year-end, or report a percentage of the prior year's total each quarter. The extended finalisation deadline (September 30) gives these businesses more time.

Micro employers (1-4 employees)

Employers with 1 to 4 employees can use the ATO's free STP solution if they don't have payroll software. They can also lodge through a registered tax agent on a quarterly basis. Some low-cost STP solutions are available specifically for micro employers who process simple payrolls. The ATO's position is that no employer is exempt from STP, but the reporting pathway can be adapted for very small businesses.

STP Compliance and Penalties

The ATO takes a "support first" approach to STP compliance but has escalating enforcement tools for persistent non-compliance.

Late or non-lodgement penalties

The ATO can impose Failure to Lodge (FTL) penalties on employers who consistently fail to submit STP reports on time. The penalty is calculated per 28-day period and scales with entity size: AUD 313 per period for small entities, up to AUD 1,565 per period for large entities (2024-25 rates). In practice, the ATO issues warnings and support notifications before imposing penalties, focusing on education for the first few missed lodgements.

Data accuracy

Inaccurate STP data doesn't just affect ATO reporting. It flows into employee income statements used for tax returns, Centrelink entitlement calculations, and child support assessments. Incorrect data can cause employees to receive wrong Centrelink payments or incorrect child support assessments. The ATO cross-checks STP data against these systems automatically, so discrepancies are flagged quickly.

STP Adoption and Impact

STP has fundamentally changed the relationship between employers, the ATO, and employees around payroll data.

785,000+
Employers now reporting through STP across AustraliaATO, 2023
10M+
Employee income statements pre-filled in myGov at tax time through STP dataATO, 2023
July 14
Annual finalisation deadline for employer STP dataATO STP Guidelines
AUD 0
Cost for employees to access their income statement through myGovATO

Frequently Asked Questions

Does STP change when or how much tax is withheld?

No. STP is a reporting change, not a tax change. The amount of PAYG withholding, superannuation, and net pay an employee receives doesn't change because of STP. It only changes how and when the payroll data reaches the ATO. Tax tables, withholding rates, and superannuation guarantee percentages are determined by separate legislation.

Do employees still need to lodge tax returns?

Yes. STP doesn't replace the annual tax return. It pre-fills income and tax data into the employee's return, making it faster and easier. But employees still need to lodge (unless they're below the threshold and don't need to). They also need to add any income not reported through STP (investment income, bank interest, gig economy earnings) and claim deductions.

What if my payroll software can't handle STP Phase 2?

If your payroll software doesn't support STP Phase 2, you need to switch to one that does. The ATO maintains a list of STP Phase 2 compliant software. Some older desktop-based payroll packages have been discontinued because they couldn't be updated for Phase 2. Cloud-based payroll systems like Xero, MYOB, and Employment Hero were updated automatically.

Can the ATO use STP data to audit my business?

Yes. STP gives the ATO real-time visibility into employer payroll practices. The ATO uses STP data for compliance activities including checking correct superannuation payments, verifying PAYG withholding accuracy, identifying potential sham contracting arrangements, and detecting unreported cash payments. The near-real-time data allows the ATO to intervene earlier rather than discovering issues years later during a traditional audit.

How does STP handle employees who work for multiple employers?

Each employer reports independently through their own STP submissions. The ATO aggregates the data from all employers into a single view for the employee. The employee sees separate income statements from each employer in their myGov account. Each employer's STP report is completely independent. They don't need to know about each other's payments.

What happens during a payroll system migration?

Switching payroll software mid-year requires careful handling of STP data. The new software must start reporting with year-to-date figures that include amounts processed in the old system. A common approach is to enter opening balances in the new system for each employee reflecting their year-to-date gross, tax, and super. The first STP report from the new system then picks up from where the old system left off. The ATO recommends employers lodge a finalisation event for the old software and start fresh year-to-date reporting in the new one if switching at financial year-end.
Adithyan RKWritten by Adithyan RK
Surya N
Fact-checked by Surya N
Published on: 25 Mar 2026Last updated:
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