Quick answer
What is Single Touch Payroll?
Single Touch Payroll (STP) is the Australian Taxation Office's system for real-time payroll reporting. Every time an employer processes a pay run, payroll information including wages, PAYG withholding, and superannuation obligations is reported to the ATO through their payroll or accounting software.
STP replaced the old annual payment summary (group certificate) system. Instead of providing payment summaries to employees at year end, the ATO now receives payroll data throughout the year and employees access their income statement via myGov.
STP means the ATO knows your payroll figures in real time — every pay cycle, not just at year end. If your payroll records don't align with your BAS or tax return reporting, discrepancies may be identified through the ATO's data-matching systems.
Who it applies to
Does STP apply to my business?
STP applies regardless of employer size, although limited concessions may be available in specific circumstances. If you pay wages, you must report through STP.
Some micro employers may qualify for alternative reporting arrangements approved by the ATO. These concessions must be applied for and are not automatic. Company directors receiving wages through payroll are generally reported through STP in the same way as employees. Businesses paying closely held payees — such as family members in some small businesses — may also have different reporting arrangements depending on their circumstances.
If you have no employees and pay yourself only as a sole trader (not through payroll), STP does not apply — sole trader drawings are not wages and are not reported through STP.
STP Phase 1 vs Phase 2
What changed with STP Phase 2?
STP was introduced in two phases. Phase 1 began in 2018 for large employers and 2019 for small employers. Phase 2 — which significantly expanded the reporting requirements — became mandatory for all employers from 2022.
| Feature | STP Phase 1 | STP Phase 2 |
|---|---|---|
| Gross wages reported | As a single total | Disaggregated by income type |
| Allowances | Included in gross | Reported separately by type |
| Tax treatment codes | Not required | Required for each employee |
| Employment type | Not reported | Full-time, part-time, casual reported |
| Child support | Not included | Garnishee and deductions reportable |
| Superannuation reporting | Separate through SuperStream | Remains separate through SuperStream; STP Phase 2 provides additional payroll reporting detail |
The key change in Phase 2 is the level of detail required. Where Phase 1 reported a gross wage figure, Phase 2 requires employers to break wages down into specific income types — ordinary time earnings, overtime, bonuses, commissions, directors' fees, and so on — and report each separately.
How it works
How does STP reporting actually work?
In practice, STP reporting is largely invisible to employers who use modern payroll or accounting software. Most employers are required to submit their STP report on or before the day employees are paid. Here is what happens each pay cycle:
1. You process a pay run in your accounting software (Xero, MYOB, QuickBooks, or a standalone payroll platform).
2. The software calculates gross wages, PAYG withholding, and superannuation for each employee based on their setup.
3. When you finalise the pay run, the software automatically sends an STP report to the ATO electronically. No separate form, no manual submission.
4. The ATO receives the data and updates each employee's income statement in myGov in near real time.
5. You pay your employees and remit the PAYG withholding to the ATO — either monthly or quarterly depending on your withholding amount.
Tax treatment codes
What are tax treatment codes?
Tax treatment codes are one of the key additions in STP Phase 2. Each employee must have a tax treatment code assigned, which tells the ATO how their income should be taxed. The code is made up of several components:
| Component | What it captures |
|---|---|
| Basis of payment | Individual, labour hire, or other specified payment |
| Tax scale | Regular, working holiday maker, foreign resident, etc. |
| Medicare levy | Full, half, or exempt |
| STSL (study loan) | Whether the employee has a HECS/HELP debt |
| Senior/pensioner | Whether the employee is eligible for the seniors tax offset |
Most accounting software derives the tax treatment code automatically from the information provided on the employee's tax file number declaration and withholding variation form. If employee records are set up correctly, this is handled without manual input.
Year end
What happens at the end of the financial year?
At the end of each financial year, you must finalise your STP data. This replaces the old payment summary process and involves:
Reviewing your payroll data for the year to ensure it is accurate and complete. Any corrections should be made before finalisation.
Submitting a finalisation declaration to the ATO through your software. This tells the ATO that your STP data for the year is complete and employees can use their income statement to lodge their tax return.
The deadline for finalisation is 14 July each year (i.e. 14 days after the end of the financial year). Employees cannot finalise their tax return until you have submitted your finalisation declaration.
You do not need to provide payment summaries to employees — they access their income statement directly through myGov or through their tax agent.
Common issues
Common STP mistakes and how to avoid them
Incorrect employee setup. If an employee's tax file number, employment type, or tax treatment code is wrong, every STP report for that employee will be incorrect. Get the setup right before the first pay run.
Not finalising at year end. Forgetting to submit the finalisation declaration means your employees cannot lodge their tax returns until you do. The ATO may also follow up on unfinalised STP data.
Corrections after lodgement. If you make an error in a pay run after the STP report has been sent, you need to process a corrective pay run or update event to correct the ATO's records. Most STP errors can be corrected this way without needing to contact the ATO directly — ignoring errors is what causes problems to compound.
Paying super late. STP reports superannuation obligations, but the ATO receives information from both STP and SuperStream and can identify discrepancies between reported super obligations and actual super payments. Late super attracts the Superannuation Guarantee Charge — always pay super on time.
Getting help
Does your bookkeeper handle STP?
If you use a bookkeeper or payroll service, STP reporting should be handled automatically as part of each pay run. Professional bookkeeping and payroll providers typically manage STP reporting — including Phase 2 compliance, tax treatment codes, and year-end finalisation — as part of their standard payroll service. advancr's payroll service covers this across Xero, MYOB, and QuickBooks.
If you are managing payroll yourself and are unsure whether your STP setup is correct, your accounting software should have a payroll compliance checklist or you can verify your settings with your software provider or a registered bookkeeper.
Common questions
Single Touch Payroll — frequently asked questions
Single Touch Payroll (STP) is the ATO's system for employers to report payroll information — wages, PAYG withholding, and superannuation obligations — directly to the ATO each time a pay run is processed. It replaced the annual payment summary system.
STP Phase 2 is the expanded version of Single Touch Payroll, mandatory for all Australian employers since 2022. It requires more detailed reporting — including income type, tax treatment codes, and disaggregated salary and allowance information — with each pay event.
Yes. STP is mandatory for all Australian employers, including those with only one employee. Very small employers may be eligible for quarterly reporting concessions, but must still report through STP.
STP reports are lodged automatically through your payroll or accounting software — Xero, MYOB, QuickBooks, or a standalone payroll platform. Each time you finalise a pay run, the software sends the STP report to the ATO electronically. No separate manual lodgement is required.
Instead of issuing payment summaries, you finalise your STP data at year end by submitting a finalisation declaration to the ATO by 14 July. Employees access their income statement through myGov to lodge their tax return.
