Guide
Single Touch Payroll (STP) Explained for Australian Small Business
If you pay even one employee in Australia, you're required to report through Single Touch Payroll. Here is the plain-English version: what STP is, what you have to report, the deadlines, and which software handles it for you.
In this guide
- STP is mandatory if you pay even one employee in Australia.
- You report each pay event to the ATO at the time you process pay.
- All major AU payroll platforms (Xero, MYOB, QuickBooks) handle it automatically.
Last updated
30 April 2026
Category
Payroll & Staff Cost
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Guide
What Single Touch Payroll actually is
Single Touch Payroll (STP) is the ATO's framework for getting payroll information in real time instead of at the end of the financial year. Every time you process pay, you send a digital report to the ATO containing the salary, PAYG withheld, superannuation, and other allowances for each employee.
STP replaced the old paper-based end-of-year processes (payment summaries / group certificates) and is now mandatory for all Australian employers, including those with only one employee.
What gets reported each pay event
- Gross wages paid to each employee.
- PAYG withholding (tax withheld from the employee).
- Superannuation guarantee contribution amount.
- Allowances, deductions, and other adjustments.
- Year-to-date totals for each employee.
STP Phase 2 — what changed in 2022
STP Phase 2 expanded the data reported. It split out employee income into categories (salary/wages, overtime, allowances by type, paid leave by type) and added reporting for tax file number declarations and termination details.
If you're using up-to-date payroll software, this is invisible — the software handles the categorisation. If you're using an older or DIY solution, you may need to manually update your codes.
The ATO has been progressively enforcing Phase 2 compliance. If your software vendor said you were Phase 2 ready, you almost certainly are. If you're unsure, log into your payroll platform and look for a 'Phase 2' or 'STP setup' indicator.
Deadlines and what to do if you're late
STP reporting is due on or before each pay event. That means if you pay your staff every Thursday, the STP report for that pay run must be lodged on or before that same Thursday.
Late lodgement is a strict-liability offence under the tax law, but the ATO's enforcement approach is generally to start with reminders and education for small business. Repeated or wilful non-lodgement attracts penalties (failure-to-lodge penalty plus interest).
- On or before each pay event — that's the rule.
- If you miss a deadline by a day or two, lodge it as soon as you realise. The ATO's small employer guidance allows for occasional late lodgements.
- If you've fallen multiple months behind, talk to a registered BAS or tax agent before catching up — they can help with disclosure and any penalty remission.
Which software handles STP for you
Every major AU payroll platform handles STP reporting automatically as part of the normal pay-run workflow. You process a pay run, you click 'submit STP', and the data goes to the ATO.
STP-ready platforms (most common in AU SMBs)
- Xero Payroll (add-on to Xero accounting subscription).
- MYOB AccountRight (included on Plus, Premier tiers).
- QuickBooks Online Payroll.
- Reckon One Payroll.
- Employment Hero (HR + payroll suite).
If you only have 1-4 employees, the ATO also offers a free 'micro-employer' option called STP Phase 2 reporting via a registered tax/BAS agent on your behalf, but most small businesses find that subscribing to Xero or MYOB payroll is simpler and barely more expensive.
Common STP mistakes new employers make
The most common mistakes that trigger ATO follow-up are:
- Forgetting to lodge for a single pay run after a holiday or sick week.
- Incorrectly categorising allowances under Phase 2 (e.g. travel allowance reported as salary).
- Not finalising the year-end STP data by 14 July — this replaces the old payment summary process and is what employees use to lodge their tax return.
- Not setting up super correctly inside the payroll software, so STP reports super amounts that don't match what was actually paid.
Important note
Use the guide as a practical reference, not as advice
This page is designed to support better commercial decisions, but it should not be treated as a substitute for professional advice.
Important note on payroll compliance
This guide is a plain-English overview of Single Touch Payroll for small AU employers. It is not legal or tax advice, and it does not cover every edge case.
- STP rules and category codes change — confirm current requirements with the ATO before relying on this guide.
- Industry-specific awards, allowances, and back-pay rules can affect how STP is reported. Confirm with a BAS agent if in doubt.
- If you've fallen behind on STP reporting, talk to a registered tax or BAS agent before catching up — voluntary disclosure usually softens any penalty position.
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