Is Single Touch Payroll Compulsory?

Single Touch Payroll (STP) allows your business to electronically report payroll information to the Australian Tax Office (ATO) each time you pay your employees. 

This information includes wages and salaries, pay-as-you-go (PAYG) withholding, and superannuation.

This system gives the ATO up-to-date employee payroll and superannuation information throughout the year and aims to make reporting more efficient and accurate for employers. 

STP isn’t just a hoop to jump through; it’s a step towards simplifying tax time.

So stay tuned to learn more about this compulsory tax reporting and how it affects your business.

Is Single Touch Payroll Compulsory for My Business?

STP is compulsory for all employers in Australia. 

You must send your payroll information to the ATO the same day you pay your employees.

This includes their salaries and wages, tax withheld, and superannuation details. 

How do you report this information? 

Through STP-enabled software such as

• Xero
• MYOB
• QuickBooks Online
• Reckon
• Sage

But do you need payroll software for one employee? Yes, you do.

There are various software options tailored for small business owners, including those with just one employee.

Another reporting option is having a third-party provider, like a tax consultant, submit STP reports on your behalf.

As well as saving you time, such help will reduce the chances of errors and ensure compliance as tax professionals stay up-to-date with the latest tax laws. 

When Did STP Become Compulsory?

Phase 1 of STP reporting was introduced in stages, starting from July 1, 2018, for larger businesses with 20 or more employees.

It expanded to include all small employers (those with 19 or fewer employees) from July 1, 2019. 

STP Phase 2 came into effect on January 1, 2022.

Expanding the original STP reporting framework requires more detailed reporting of payroll information to the ATO. ‘

Such details include

• Breaking down the components of gross income.
• Itemising different income types.
• Specifying if payments are tax-exempt.
• The reason for an employee’s termination.
• The country code for employees who are on a working holiday.
• Information on child support deductions and garnishees directly through STP.

Are There Penalties for Not Implementing STP?

If you don’t lodge the required STP reports on time, the ATO may apply a Failure to Lodge (FTL) penalty. 

The penalty calculation depends on the size of your business and how late you lodged the report.

• Small businesses can incur a penalty of one penalty unit for each period of 28 days that the report is overdue, up to a maximum of five penalty units.
• Medium businesses with taxable earnings or current GST turnover of more than $1 million and less than $20 million can be penalised double the penalty unit.
• Large businesses with taxable earnings or current GST turnover of $20 million or more face the penalty unit multiplied by five.  

What Do I Need to Do Now?

Follow these steps to implement STP for the first time:

1. Ensure your payroll software is STP-enabled and updated to Phase 2 requirements​​.
2. Start reporting through STP Phase 2 by following your software’s guidelines for payroll events​​.
3. Report the payments you’ve made, including salary or wages, PAYG withholding, and superannuation information​​.
4. Include components related to employees, such as commencement dates or changes in employment conditions​​.
5. If an employee leaves, include the necessary cessation information​​.

Be sure to follow the specific STP reporting rules outlined by the ATO​​. 

If this seems too much to grasp, or you’re too busy, consider hiring a tax professional.

They can handle all STP reporting, ensuring your peace of mind and freeing you up to concentrate on your business or enjoy a little more downtime. . 

Partner with a Pro for Seamless STP Reporting

When it comes to STP reporting, you don’t have to go it alone.

Teaming up with a professional can be a game-changer.

They ensure everything is accurate and submitted on time, taking the stress off your plate and leaving you free to focus on running your business.

That’s exactly what we offer when you partner with us at Pherrus.

At Pherrus, we’re not just service providers – we’re trusted allies.

We provide clear communication, expert advice, and are committed to making STP reporting as straightforward as possible for our clients.

We’re here to help navigate the intricacies of STP reporting, turning a complex task into a seamless process through partnership.

So, yes, STP is compulsory for most businesses in Australia.

It’s a significant part of the tax system, designed to simplify reporting obligations and provide real-time visibility over payroll activity. 

Despite the complexities associated with STP, a Pherrus partnership means you’ll have a dedicated tax consultant taking care of your STP, so it’s always correct, on time, and stress-free.  

Contact Pherrus today to take the first step towards simplifying your payroll process and keeping your business on track. 

Fill out our online form or call +61 (02) 9099 9109 to book an appointment at our  Bella Vista office in Sydney, NSW.

Do you still need more details on 

• What is Single Touch Payroll for employees?
• Who has to do Single Touch Payroll?
• What happens if you file STP late?

Don’t hesitate to get in touch with the Pherrus team today for answers!