Managing payroll presents a common challenge for business owners, particularly as your business expands. Imagine your startup company rapidly growing its workforce, leading to the complexities of managing payroll.
The good news: you no longer have to spend endless hours sifting through paperwork. Thanks to software technology advancements, automating and simplifying this critical task is now possible.
At the core of this advancement is Single Touch Payroll (STP), an initiative by the Australian Taxation Office (ATO) that has transformed payroll operations. STP offers more than just compliance—it streamlines your payroll processes, minimises errors, and offers clearer insights into your payroll activities.
In this blog, we’ll guide you through understanding the basics of STP and the essential steps for its successful implementation.
What is Single Touch Payroll (STP)?
Single Touch Payroll (STP) is a government initiative aimed at simplifying how you report payroll information to the ATO. It’s a reporting system obligating employers to electronically submit payroll and superannuation information to the ATO following each pay run.
Here’s how it works: When you pay your employees using STP-enabled software, you report their payroll details directly to the ATO. This includes key details like salaries and wages, Pay As You Go (PAYG) withholding, and superannuation liability information.
STP-enabled software automates the reporting process for you. More importantly, this reporting is done in real-time, meaning the ATO receives up-to-date information with each pay cycle.
The best part? Your payroll routine stays the same. You continue to pay your employees as usual, on your regular schedule—whether it’s weekly, fortnightly, or monthly.
Remember, complying with STP regulations is mandatory for all Australian businesses. So it’s important to stay updated with the latest STP-enabled software and choose one that can help you seamlessly fulfil these obligations.
When did STP become mandatory?
Single Touch Payroll (STP) was introduced in phases to help employers transition smoothly:
- July 1 2018: STP reporting became mandatory for employers with 20 or more employees.
- July 1, 2019: STP reporting extended to employers with 19 or fewer employees.
From January 1, 2022, STP Phase 2 began–which improved the reporting process by expanding data collection to include additional payroll information.
As a business owner, you should have already implemented STP for reporting and transitioned to STP Phase 2, unless you’ve received a deferral or exemption.
For new employers, they must start STP reporting with Phase 2-enabled software when they begin payroll to prevent potential penalties.
For more information and to ensure you’re compliant, review the following resources available from the ATO on STP reporting requirements:
What are the key processes associated with single touch payroll?
- Real-time Reporting: STP requires employers to report payroll details—salaries, wages, PAYG withholding, and superannuation contributions—to the ATO with every pay cycle. This ensures that the ATO can monitor compliance and address issues promptly.
- Employee Payment Summaries: STP eliminates the need for annual payment summaries. Instead, employees can access their year-to-date income and tax information through their myGov account, reducing paperwork and providing instant financial access.
- Superannuation Reporting: Employers must report superannuation contributions alongside payroll information. This ensures that superannuation records are current and compliant with regulations.
Who needs to do single touch payroll?
STP applies to all employers in Australia, regardless of their business size. This includes companies, trusts, partnerships, and sole traders. If you employ people, you need to comply with STP reporting requirements.
STP Reporting Options
The STP reporting options vary based on the number and type of employees you have.
Employers with 19 or Fewer Employees: If you have 19 or fewer employees, you should have started STP reporting from July 1, 2019. This applies to small employers who must now use STP-enabled software to report payroll information to the ATO.
Employers with 1-4 Employees: For micro employers with 1-4 employees, if you don’t currently use payroll software, you have two options. First, you can browse the STP product register to find suitable software. Second, you can use the quarterly reporting concession, which allows a registered tax or BAS agent to report quarterly on your behalf.
Quarterly Reporting Concession: This option is available for micro employers meeting specific criteria. A registered tax or BAS agent can submit your STP reports quarterly instead of each pay cycle. However, this concession is only granted in exceptional circumstances.
Small Employers with Closely Held Payees: If your business has closely held payees (individuals directly related to the business, such as family members, directors, or shareholders), you need to report their payments through STP starting from July 1, 2021. This includes all types of closely held payees, ensuring their payroll information is up to date.
Employers with 20 or More Employees: If you have 20 or more employees, you should have been reporting through STP since July 1, 2018. This requirement applies to substantial employers who must use STP-enabled software for payroll reporting to the ATO.
Finalising your data at the end of financial year
At the end of the financial year, you must finalise your STP data. This involves declaring that your reporting for the financial year is complete.
Once finalised, your employees’ Income Statements in ATO online services will be marked as ‘Tax Ready.’
This allows employees or their registered agents to use the Income Statements for lodging their tax returns.
You won’t need to provide a payment summary annual report for payments reported through STP.
What is the penalty for failing to lodge STP?
The ATO has made significant efforts to inform business owners about the mandatory Single Touch Payroll (STP) reporting requirements.
Despite these communications, some businesses may still not be compliant. If you haven’t started STP reporting, you may incur failure to lodge (FTL) penalties. These penalties can be substantial and may increase the longer your business remains non-compliant.
If you are unsure about how to start with STP or need assistance, consider reaching out to a registered tax or BAS agent like Blackwattle Tax. We can help you understand your obligations and ensure you are meeting all reporting requirements
Need help implementing single touch payroll for your business?
Connect with our team at Blackwattle Tax to ensure that your payroll system is aligned with the requirements set by the ATO.
Our goal is to empower you with the knowledge and tools to make informed decisions, leading to enhanced financial and tax outcomes.
As your trusted outsourced accounting partner, we offer a wealth of expertise through our team of seasoned professionals, including chartered accountants and registered tax agents.
At Blackwattle Tax, we have a proven track record of supporting businesses across diverse sectors.
Why Choose Blackwattle Tax?
- Expert Guidance: Our professionals are here to help you successfully modernise your payroll reporting.
- Tailored Solutions: We provide customised tax strategies to meet your specific business needs.
- Proven Success: Our clients benefit from our comprehensive support, leading to better financial management and compliance.
Schedule a FREE 30-minute consultation today to discover how we can help you make strategic decisions and streamline your business operations.
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Disclaimer: We endeavour to make sure the information provided in this guidance is up to date and accurate. Please note, that the information is only intended to be a guide, with a general overview of information. This guidance is not a comprehensive document and should not be interpreted as legal advice or tax advice. The information is general in nature.
