Article
11 min read
Single Touch Payroll: The Ultimate Payroll Reporting Guide
Global payroll
Author
Shannon Ongaro
Published
August 13, 2024
Last Update
November 05, 2024
Table of Contents
How Single Touch Payroll works
Benefits of Single Touch Payroll
How to implement Single Touch Payroll
Common challenges and solutions
Staying compliant with Single Touch Payroll
Future of Single Touch Payroll
Streamline payroll in Australia with Deel
Key takeaways
- Single Touch Payroll (STP) is an Australian government initiative to streamline payroll data reporting by businesses to the Australian Taxation Office (ATO).
- STP improves the timeliness, efficiency, and accuracy of payroll reporting and provides transparent information for employees.
- It is essential for Australian businesses to correctly implement STP so they are compliant with regulations and can maximize its benefits.
Single Touch Payroll (STP) is an Australian government initiative to simplify payroll data reporting to the ATO, including salaries, wages, pay-as-you-go (PAYG) withholding, and superannuation contributions.
STP requires that employers (or their registered tax or Business Activity Statement (BAS) agents) report this information to the ATO at each pay event rather than when they file annual tax returns. This promotes accurate and timely data collection, streamlines payroll reporting processes, and improves the integrity of the tax and superannuation systems in Australia.
STP reporting was introduced on July 1, 2018, for employers with 20 or more staff and was expanded to include all employers from July 1, 2019. It is mandatory and must be implemented using STP-compliant payroll software.
Real-time data reported to the ATO through STP means that end-of-year payment summary annual reports and group certificates are no longer required. This makes the payroll reporting process more efficient and transparent for businesses and the ATO.
How Single Touch Payroll works
STP simplifies payroll processes by integrating reporting directly into regular pay cycles and has become essential to running payroll in Australia.
Here’s how it works:
1. Prepare your payroll data
Using STP-enabled software, prepare your payroll information. You must report all pay events (including out-of-cycle payments) on or before the payday.
You should, at a minimum, include the following for each employee:
- The payment amount, subject to withholding for the pay cycle
- Gross salaries and wages and PAYG withholding for the pay cycle, which can be negative as a result of any amendments you’ve made
- Year-to-date (YTD) values of gross salaries or wages, allowances, other payments, deductions, PAYG withholding, and the employer superannuation liability (including for defined benefit funds) and ordinary-time earnings (OTE). The YTD amounts can be less than a previous report (e.g., in case of recovery) and can be zero but not negative
- The employee’s tax file number (TFN) for a salaried employee or Australian business number (ABN) for a contractor. If you don’t have a TFN for a salaried employee, you must use the relevant TFN exemption code
2. Report to the ATO
Your STP-enabled payroll service will automatically send your information to the ATO. This automated approach bypasses manual processing and reduces the risk of error.
The ATO lists authorized STP-enabled software packages that interact directly with the ATO. There are several providers to choose from, varying by functionality, target market, pricing, and features.
Depending on your software, your data will go directly to the ATO or through third-party sending service providers (SSP).
Once you’ve finalized and declared your STP data at the end of the financial year, your employees’ income statements will be marked as “tax ready”. This makes them available for filing tax returns and for downloading from the MyGov portal.
3. Frequency and deadlines
STP reports are due on or before each payday, i.e., the date you’ve set for electronic payment transfers. If you haven’t specified these dates in advance, the date you intend to transfer payments to your employees becomes your deadline.
If you make payments outside of the regular pay cycle, known as out-of-cycle payments, you can report these by:
- Lodging a pay event on or before the payday
- Including the out-of-cycle payment in the next regular payment cycle, unless that payment cycle falls in the next financial year in which case you should report the payment by June 30 of the payment year
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Benefits of Single Touch Payroll
STP supports all stakeholders by improving payroll processes for organizations, promoting an efficient and transparent payroll system, and contributing to a more streamlined and reliable payroll system in Australia.
Benefits for employers
- Streamlined payroll processing: STP integrates payroll reporting with regular pay cycles, without having to withhold amounts for subsequent reporting dates, making the process seamless and efficient
- Less administration: By switching to online payroll software and eliminating end-of-year payment summaries, STP reduces manual intervention, paperwork, and administrative burden
- Fewer errors: Real-time reporting, automated calculations, and reporting wage and withholding data at the same time minimize the chances of error and make it easy for discrepancies to be identified and promptly corrected
- Quick and easy access to new employee information: Rather than waiting for employees to provide their tax file numbers and other information, employers can access and update new employee information directly through the online portal, supporting timely and accurate records
- Improved compliance: STP automation boosts compliance by ensuring up-to-date information is submitted to the ATO and reporting deadlines aren’t missed
- Cost savings: Reduced administrative tasks and improved accuracy result in lower costs
- Enhanced record keeping: STP requires a move to digital records which are easier to manage and store, improving overall record-keeping efficiency
Benefits for employees
- Easy access to payroll information: Employees can access their payroll information, including year-to-date earnings and superannuation contributions, quickly and easily through their MyGov accounts
- Timeliness: Employees don’t have to wait until the end of the financial year to review their tax data, as it will be updated and available after each pay cycle
- Transparency and trust: The greater transparency and easier access to pay and superannuation information facilitated by STP fosters trust and satisfaction for employees
Benefits for the government
- Enhanced data collection: STP provides the ATO with accurate, real-time payroll data, improving the quality and timeliness of information collected
- Improved tax compliance: Real-time reporting helps identify non-compliance and ensures that tax information and superannuation contributions are accurately reported and paid
- Better resource allocation: The ATO can streamline and allocate its resources more efficiently given the improved data accuracy and timeliness of STP
How to implement Single Touch Payroll
Correctly implementing STP is essential for ensuring your payroll reporting process operates efficiently. While your experience will vary depending on the payroll provider/software you use, here is a general overview of the process:
Step 1: Evaluate your payroll system
Check to see if your payroll software is STP-compliant. Confirm with your software provider that your current system supports STP reporting. If not, consider upgrading to STP-enabled software or an STP-compliant third-party payroll service.
Step 2: Set up STP for your organization
The setup process varies depending on your STP-compliant software, but here are the typical steps:
- Register your software with the ATO for STP reporting: This usually involves linking your STP-enabled software with the ATO using a software ID (SSID) provided by the software
- Connect with the ATO: After your register your software, it should connect directly with the ATO for sending STP reports
- Establish authorized persons: Identify the people at your organization who will play key roles in the payroll reporting process and validate them in your system, i.e., those who authorize and submit STP reports, as well as points of contact for the ATO
Step 3: Verify and test your system
Ensure your system is working correctly:
- Check data accuracy: Check that all your employee details, including tax file numbers and superannuation information, are correctly entered into your system
- Run test reports: Conduct test runs to identify any errors or discrepancies in your reporting process
- Verify data accuracy: Cross-check your test data against your records to ensure accuracy
Step 4: Train your staff
Train your payroll and HR staff on the STP reporting process to maximize the efficiency of your payroll system. Educate them on:
- STP reporting requirements: What needs to be reported and by when
- Using STP-compliant software: Hands-on training on using the STP-enabled payroll software
- How to deal with errors: How to troubleshoot by identifying and correcting errors in the reporting process
Step 5: Start reporting
Start reporting your payroll information through STP:
- Send your reports: Report your data each pay cycle using the STP-compliant software you’ve set up and check that your software returns a “successful” status
- Monitor your reports: Regularly check your reports for any issues and ensure ongoing compliance with ATO requirements
- Finalization: After the end of each financial year, make a finalization declaration to the ATO (on or before July 14) to confirm that all data is correct and to gain exemptions from providing payment summaries or lodging payment summary annual reports for employees reported through STP
Common challenges and solutions
While STP has many benefits, here are some common challenges you may encounter:
Technical issues
As with any sophisticated software system, your STP-compliant software may have technical issues, glitches, or integration problems. To minimize these, regularly update your payroll software to maintain the latest compatibility and functionality. Should troubles arise, engage with your software provider’s support team.
Also, run routine testing and backups to prevent data loss and ensure a smooth ongoing process.
Reporting issues
The ATO publishes a list of common STP reporting issues with suggestions for fixing them. These issues fall into four categories:
- Payroll issues: If you need to correct employee YTD amounts or employer-level period totals (i.e., gross payments and withholding) reported in a pay event
- Update issues: If you need to change employee YTD amounts previously reported
- Adjustment issues: If you need to report an increase or decrease to previously reported employer-level period totals but do not wish to override previously reported amounts
- Full file replacement (FFR) issues: If you want to replace the last lodgement that was sent to the ATO containing significantly inaccurate data
The ATO website lists detailed remedies for dealing with reporting issues such as those above, generally involving one or more of the following:
- Lodge an update event with corrected YTD or period values
- Check that your declarations (e.g., finalizations) were correctly added and processed in your payroll software
- Check for unintended duplication of data
- Lodge an FFR
- Contact your software service provider
Data accuracy
Accurate data entry is crucial for STP compliance. To support this, implement a double-check system (or “peer review”) to minimize errors, verifying data entries by at least one other team member before submission.
Use automated tools whenever possible to validate information and flag discrepancies. Also, regularly audit your payroll data to maintain accuracy.
Employee communication
When changes are made to your STP system you’ll need to communicate them to your workforce in a way they’ll understand. Here are some ways to improve your team’s understanding of STP and encourage buy-in:
- Hold information sessions to explain how STP works and its benefits
- Provide clear, concise written communications, e.g., emails or newsletters, explaining how STP affects their payroll information
- Invite employees to access their MyGov accounts and view their payroll data in real-time, promoting transparency and trust
Staying compliant with Single Touch Payroll
Staying compliant with STP requires a proactive approach, such as the following:
Ongoing compliance
Regularly review and audit your payroll processes to ensure ongoing STP compliance. Verify that all employee details, tax file numbers, and superannuation information are accurate and up-to-date.
Schedule periodic compliance checks and maintain accurate records of your payroll submissions.
ATO resources and support
Use ATO resources such as online guides, webinars, and customer support. The ATO website offers detailed information and updates on STP requirements to help you stay informed and compliant.
Software updates
Keep your payroll software up to date with the latest STP requirements. Regularly install updates and patches provided by your software vendor to maintain compliance and avoid technical issues.
Continuous Compliance™
Future of Single Touch Payroll
While STP is now widely adopted in Australia, it continues to evolve through a second phase of implementation called STP Phase 2.
STP Phase 2
STP Phase 2 expands STP and reduces the reporting burden for employers reporting to multiple government agencies. The key changes under Phase 2 are:
- More detailed reporting requirements, e.g., disaggregation of gross amounts
- Streamlined reporting of employment and taxation conditions
- Reporting of additional income types
- Introduction of country codes for payments to employees residing overseas
- Options to include child support payments and (previous) software and payroll IDs
The benefits of Phase 2 for employers include:
- No need to send TFN declarations to the ATO
- More efficient reporting options for certain payment types
- Payroll information provision to Services Australia, streamlining the sharing of employment and payroll information
The benefits for employees include:
- Improved pre-filling of individual tax return information
- Better diagnostics to prevent unnecessary tax payments due to incorrect information
- Assisting Services Australia in pre-filing details and streamlining processes for claims, reports, Family Tax Benefit payments, and debt payments
Impact on businesses
Businesses should adopt Phase 2 by updating their payroll systems and processes. This may involve staff training and ensuring payroll software is compliant with the new requirements.
Early preparation and staying informed about upcoming changes will support a trouble-free transition to Phase 2.
To further assist, the ATO is adopting a flexible approach and allowing for individual business circumstances where possible. Businesses using digital service providers (DSPs) that need more time to update their solutions for STP2, for instance, can apply for a deferral that is automatically passed on to the businesses.
Streamline payroll in Australia with Deel
Deel Global Payroll offers a comprehensive solution for businesses managing payroll in Australia and globally. You can ensure compliance with Australian payroll regulations, including STP, while seamlessly consolidating your Australian and international payroll operations.
Deel simplifies payroll management by providing a unified platform that handles multi-country payroll, tax compliance, and employee benefits. This allows businesses to focus on growth and efficiency, knowing that their payroll is being managed accurately and in compliance with regulations.
Request a demo to see how Deel can transform payroll reporting for your organization.
About the author
Shannon Ongaro is a content marketing manager and trained journalist with over a decade of experience producing content that supports franchisees, small businesses, and global enterprises. Over the years, she’s covered topics such as payroll, HR tech, workplace culture, and more. At Deel, Shannon specializes in thought leadership and global payroll content.