Single Touch Payroll (STP) is the Australian Taxation Office system that requires every employer in Australia to send salary, PAYG withholding, and superannuation information to the ATO on or before each payday, using STP-enabled payroll software. Instead of waiting until the end of the financial year to reconcile what your staff were paid, the data goes to the ATO with every pay run. All employers have been required to report this way since 1 July 2019, and the system moved into Phase 2 on 1 January 2022, which broke the reporting down into more detailed categories.1CPA Australia. Single Touch Payroll (STP) – Phase 2
Which Employers Have to Report
If you pay anyone in Australia, you report through STP. Sole traders with a single casual, partnerships, trusts, companies, non-profits, large employers — the obligation applies regardless of headcount. Employers with 20 or more employees came in on 1 July 2018, and everyone else followed on 1 July 2019.2Australian Taxation Office. Rules of Reporting Through STP
Reporting payments to contractors is voluntary, and only applies where you have a voluntary PAYG withholding agreement with the contractor. If you do report a contractor, use their ABN rather than a Tax File Number.2Australian Taxation Office. Rules of Reporting Through STP
What Goes Into Each STP Report
Every pay event must include the period’s gross salary or wages (BAS label W1), PAYG withholding (BAS label W2), and the superannuation liability for each employee.2Australian Taxation Office. Rules of Reporting Through STP Each employee record needs an accurate Tax File Number and current contact details, otherwise the file will fail validation when your software transmits it.
You still lodge a pay event when the withholding for the period is nil. A zero-withholding pay run is not a skip.3Australian Taxation Office. Payments You Must Report
Under Phase 2, gross pay is no longer a single figure. You disaggregate it into separate components so the ATO and Services Australia can see exactly what an employee is being paid and why:4Australian Taxation Office. Disaggregation of Gross
- Gross base salary and wages
- Paid leave (annual, personal, and other leave types)
- Allowances such as travel, tool, and uniform
- Overtime
- Bonuses and commissions
- Directors’ fees
- Lump sum W (return-to-work payments)
- Salary sacrifice, split between super contributions (type S) and other benefits (type O)
The salary sacrifice split catches employers out. Amounts sacrificed into a complying super fund must be reported separately from amounts sacrificed toward things like a novated lease or extra leave.5Australian Taxation Office. Salary Sacrifice Your software handles the categorisation, but only if the underlying payment types are set up correctly.
How the Submission Works
The report is due on or before payday. Payday means the payment date you specify in the electronic transaction to your bank, or if you don’t specify one, the date you intend the money to reach the employee.2Australian Taxation Office. Rules of Reporting Through STP Most payroll systems send the file automatically as you finalise the run.
Payments made outside the normal cycle — a bonus, a back payment — can go through as a separate pay event on or before the day of payment, or be rolled into the next regular pay event if your software supports that.2Australian Taxation Office. Rules of Reporting Through STP
Your software has to meet the ATO’s technical standards to send data. The ATO publishes a product register of solutions that have satisfied its Digital Service Provider security requirements.6ATO Software Developers. Product Register The ATO does not endorse specific products, so you pick what suits your size and complexity.
Once the file transmits, your software returns a receipt. If the ATO detects missing fields or errors, you’ll see a notification identifying which records need to be fixed. Because year-to-date figures flow through with every pay event, you no longer have to issue employees an end-of-year PAYG payment summary as long as you finalise through STP.7Fair Work Ombudsman. Payment Summaries and Income Statements
What Employees See in myGov
After the ATO processes each report, the information appears in the employee’s ATO online services through myGov or the ATO app. Employees can check year-to-date salary, wages, and tax withheld at any point during the year by signing in and going to Employment and Income Statement.8Australian Taxation Office. Access Your Income Statement
The status label matters. Until you complete the end-of-year finalisation, the statement shows as preliminary. Once you finalise, it changes to “Tax ready” and the ATO sends a myGov notification to the employee. An employee who lodges a return before their statement is Tax ready may end up having to amend it later.8Australian Taxation Office. Access Your Income Statement
Annual Finalisation
At the end of each financial year you submit a finalisation declaration confirming that year-to-date figures are correct. For 2025–26, the deadline is 14 July 2026.9Australian Taxation Office. Key Dates for Employers to Remember in 2026 The declaration covers everyone you paid and reported during the year, including terminated employees and casuals who only worked a few shifts.10Australian Taxation Office. End-of-Year Finalisation Through STP
Closely held payees — family members, directors, shareholders, or trust beneficiaries — have a later finalisation deadline of 30 September.10Australian Taxation Office. End-of-Year Finalisation Through STP
Watch out if you switch payroll software mid-year. Importing year-to-date amounts into the new system without zeroing them out in the old one can double-count income on employees’ statements. Either zero out the old software or use the new system’s function to notify the ATO of your previous Business Management Software ID.10Australian Taxation Office. End-of-Year Finalisation Through STP
Fixing Mistakes
If the last year-to-date figures you reported don’t match your payroll records, correct the data within 14 days of finding the error, or include the correction in the next regular pay event for that employee in the same financial year.11Australian Taxation Office. Correcting Information Reported Through STP
Overpayments identified in the same financial year are simpler to fix. The employee repays the net amount, and you correct the year-to-date figures by reducing them in the next regular pay run or by lodging a stand-alone update event within 14 days. Where a correction changes your PAYG withholding liability for an earlier period, you can revise the Activity Statement for that period, or carry the correction forward to the current period’s withholding. There is no ceiling on how much you carry forward if you have already remitted too much. Either way, record the decision in writing.11Australian Taxation Office. Correcting Information Reported Through STP
If you spot a mistake after lodging finalisation, amend as soon as possible. There’s no formal grace period once finalisation is in.
Penalties for Late or Incorrect Reports
Failing to lodge STP reports on time attracts a failure-to-lodge penalty that accrues for each 28-day period (or part of one) that the report stays outstanding, up to a cap. Penalties are calculated in penalty units, currently $330 each.12Australian Taxation Office. Penalty Units Separate penalties apply for false or misleading statements: 25% of the shortfall for failing to take reasonable care, 50% for recklessness, and 75% for intentional disregard.13Australian Taxation Office. Penalties for Making False or Misleading Statements
Concessions and Exemptions
The ATO recognises that reporting digitally in real time isn’t realistic for every employer. Several concessions exist.
Closely Held Payees
Small employers with 19 or fewer payees can report closely held payees quarterly rather than each pay cycle. Arm’s length employees still have to be reported on or before each payday.14Australian Taxation Office. Small Employers – Closely Held (Related) Payees
Micro Employers
Micro employers who don’t use computerised payroll — for example, tracking wages on a spreadsheet or on paper — can apply for a two-year concession to report quarterly through a registered tax or BAS agent. You need to lodge activity statements electronically through a registered agent, have no outstanding tax debts or lodgment obligations (unless on a payment plan or deferral), and meet the ATO’s exceptional circumstances guidelines.15Australian Taxation Office. Micro Employers
Low Digital Capability or Unreliable Internet
Small employers with 19 or fewer employees who have low digital capability or unreliable internet can apply for a full exemption from STP reporting for a given financial year. A registered agent can lodge the exemption application for you. If you can’t access online services at all, phone the ATO on 13 28 66.16Australian Taxation Office. Exemptions From STP Reporting
Deferrals
If you haven’t started STP reporting yet and need more time, request a deferral through Online services for business (Employees, then STP deferrals and exemptions). A registered agent can apply through Online services for agents, or you can phone 13 28 66.17Australian Taxation Office. Deferrals The ATO assesses each application individually, and if you’re applying on hardship grounds, hold on to documentation of the specific barrier, whether that’s geographic isolation, infrastructure, or a technical failure. The ATO may ask for evidence before granting relief.