What Is Single Touch Payroll and How Does It Affect You?

Single Touch Payroll (STP) is the system that requires employers to report wages, tax withheld and superannuation to the ATO every time they run payroll, rather than once a year. If you have at least one employee, you are almost certainly required to lodge STP through your payroll software on or before each payday.

This guide covers what STP actually reports, what changed with STP Phase 2, how it now connects to Payday Super, and what you need to have in place to stay compliant.

What Does Single Touch Payroll Actually Report?

Every time you process a pay run, STP sends the ATO a digital report covering gross wages, PAYG withholding, and superannuation liability for each employee, for that specific pay period. It replaces the old system where the ATO only found out these figures at tax time or through quarterly BAS reporting.

The report is generated automatically by STP-enabled payroll software at the moment you finalise a pay run. You are not filling out a separate form. If your software is set up correctly, STP lodgement happens as part of paying your staff, not as an extra task afterward.

At the end of the financial year, instead of issuing employees a payment summary, you complete an STP finalisation declaration. This is due by 14 July each year and confirms to the ATO and to your employees that the year’s figures are complete and correct.

What Changed With STP Phase 2?

STP Phase 2 expanded the detail employers report, without changing how often you report. Instead of one lump gross wage figure, Phase 2 breaks pay into separate categories such as overtime, bonuses, allowances, and paid leave.

The ATO introduced Phase 2 so that data already sitting in your payroll software could be shared with other government agencies, particularly Services Australia. This is meant to reduce how often employees need to separately provide payslips when applying for family assistance payments or income support.

For most small businesses, Phase 2 did not mean extra manual work. Payroll platforms such as Xero updated their pay categories to map to the new reporting requirements, so the shift mainly involved checking that your pay items were correctly categorised rather than changing how you process payroll day to day.

How Does STP Connect to Payday Super?

STP and Payday Super are two separate obligations that now work together closely. STP is the reporting system, telling the ATO what you paid employees and what super you owe on those wages. Payday Super is the payment rule, requiring that super to actually reach the employee’s fund within seven business days of payday.

Because STP reports super liability every pay run, the ATO can now compare what you reported against what actually landed in employee super funds, almost in real time. Under the old quarterly system, a gap between what was owed and what was paid could sit unnoticed for months. That gap is far more visible now.

This is worth understanding clearly, since it changes what happens if something goes wrong. STP does not just create a paperwork trail, it is the data source the ATO uses to check whether your payroll and super obligations are actually being met on time.

Quick tip: Review your STP finalisation before 14 July each year, not on the day. Checking employee details, pay categories and total figures a few days early gives you time to fix errors before the deadline, rather than lodging a rushed correction afterward.

What Do You Actually Need to Do to Comply With STP?

If you already run payroll through STP-enabled software, most of the compliance work is built into your normal pay run process. There are still a few things worth checking regularly rather than assuming everything is running correctly in the background.

Confirm each pay run is actually being lodged with the ATO, not just calculated in your software. Check that new employees are set up with the correct tax file number declaration and super fund details before their first pay run. Make sure pay categories such as overtime, bonuses and allowances are mapped correctly under STP Phase 2 reporting. Complete your STP finalisation declaration by 14 July each year, and correct any errors as soon as you notice them rather than waiting for the ATO to flag them.

If you are still paying staff manually or through a system that is not STP-enabled, this is not optional to fix. Every employer with eligible employees needs to be reporting through STP, and moving to compliant payroll software such as Xero is usually the simplest path to get there.

What Happens If You Don’t Lodge STP Correctly or On Time?

Late or missing STP lodgements can attract failure to lodge penalties from the ATO, and repeated non-compliance is taken more seriously than an occasional one-off error. Beyond the direct penalty risk, incorrect STP data can also throw off your super reporting, which now has a much tighter compliance window under Payday Super.

The ATO has generally taken a practical approach with small businesses genuinely trying to get STP right, particularly around the transition to Phase 2 reporting. That leniency has limits, though, and it depends on a business showing a pattern of trying to comply rather than ignoring the obligation altogether.

If you spot an error in a lodged STP report, correcting it as soon as possible is always the better option than waiting until your next BAS or year-end finalisation to sort it out. Small mistakes are far easier to fix close to when they happened.

Do You Need Special Software for STP?

Yes. STP reporting has to be lodged through software that is either STP-enabled itself or connects to a third-party STP reporting service. You cannot lodge STP manually through a spreadsheet or a paper form, since the whole system is built around digital, per-pay-run reporting.

Most cloud accounting platforms built for Australian small businesses, including Xero, have STP reporting built in as a standard part of running payroll. If you are choosing software for the first time, confirm STP Phase 2 compliance specifically, since some older or very basic payroll tools have not kept pace with the updated reporting categories.

Businesses across Melbourne and the rest of Australia that run payroll through us have STP lodgement, payslips and superannuation reporting handled as part of our standard payroll service, so it is one less thing to manage separately from your bookkeeping.

What Does STP Look Like for a Typical Small Business?

Take a hospitality business with six casual staff paid weekly. Under STP, each Friday’s pay run automatically sends the ATO a report covering that week’s wages, tax withheld and super for every employee, broken down by pay category under Phase 2. The owner does not fill out anything extra. The report goes out as part of finalising the pay run in their payroll software.

Over the year, this means the ATO already has a running picture of the business’s payroll before tax time even starts. When 14 July comes around, the STP finalisation is mostly a matter of checking the figures are complete and accurate, rather than compiling a year’s worth of payment summaries from scratch. Employees can also see their year-to-date income and tax figures through myGov at any point, rather than waiting for a single annual document.

The main place this business needs to stay on top of things is when pay categories change, such as adding a new allowance or changing how overtime is calculated. Getting the category mapping right at that point avoids a messier correction later, since STP data feeds directly into both tax time reporting and the ATO’s view of Payday Super compliance.

How Much Does STP-Compliant Payroll Cost With a Bookkeeper?

Payroll processing through AffordBooksTax is $14 per employee, per pay period, whether you pay weekly, fortnightly or monthly. This includes STP lodgement each pay run, payslips sent to employees, and superannuation reporting aligned with Payday Super timing requirements.

This sits alongside our revenue-tiered bookkeeping services, since payroll and bookkeeping are cleanest when reconciled together rather than managed in separate systems. You can see the full breakdown on our pricing page, and if you want the detail on the payment side of super obligations, our guide to Payday Super covers what changed from 1 July 2026.

Frequently Asked Questions

Do all small businesses need to report through STP?

Yes. Any employer with at least one eligible employee needs to report through STP, regardless of business size or industry. There is no exemption based on turnover or number of staff.

How often do I need to lodge STP reports?

STP reports are lodged every pay run, whether that is weekly, fortnightly or monthly, at or before the time you pay your employees. You also complete a separate STP finalisation declaration by 14 July each year.

What is the difference between STP Phase 1 and Phase 2?

Phase 1 reported wages, tax withheld and super as broader totals. Phase 2 breaks these figures into more detail, separating out items such as overtime, bonuses and paid leave, mainly so the data can also be shared with other government agencies.

Does STP replace the need for payslips?

No. You still need to provide employees with a payslip for each pay run. STP is a separate report sent to the ATO and does not replace your obligation to give staff their own pay record.

What happens at the end of the financial year with STP?

Instead of issuing traditional payment summaries, you complete an STP finalisation declaration by 14 July. This confirms your reported figures for the year are accurate and lets employees access their income statement through myGov.

Can I still run payroll manually if I have only one employee?

No. STP applies regardless of how many employees you have, including a single employee. You need payroll software that supports STP reporting rather than managing pay manually or on a spreadsheet.