Single touch payroll is a payroll initiative from the Australian government. With single touch payroll, companies report employees’ payroll information directly to the government each time they run payroll.

Read on to discover how single touch payroll works and what the benefits are.

What is single touch payroll (STP)?

Single touch is accomplished by using STP enabled software that automatically submits payroll reports to the Australian Taxation Office (ATO) every time a business runs payroll. Australian companies can also use an external third-party service provider who files the report on your behalf.

Single touch payroll is mandatory for all businesses in Australia now. The first phase rolled out on July 1, 2018 to employers with 20 or more employees, and then rolled out to employers with 19 or fewer employees on July 1, 2019. The data collected through single payroll was further expanded to encompass additional payroll information on January 1, 2022.

This means all employers in Australia should now be using single touch payroll phase 2 reporting unless they have gotten a deferral or exemption. If you are new to hiring employees in Australia, you will need to start paying them through STP-enabled payroll software as soon as possible to avoid getting penalized.

How does single touch payroll work?

With single touch payroll, you run your payroll and pay your employees as normal on whatever cycle works for you: weekly, biweekly or monthly. On the backend, the STP-enabled payroll software will automatically send the ATO a report with all necessary information, including salaries and wages, pay-as-you-go (PAYG) withholding and super liability information. If you are using a third-party tax agent, they will generate the report and file the report on your behalf.

At the end of the year, you’ll finalize your STP data to declare you have completed your mandatory reporting for the financial year. Once you do that, your employees’ income statements on the government online portal will be marked as tax ready, then they can use that information to file their individual tax returns.

Benefits of single touch payroll

Streamlined reporting

Prior to single touch payroll, businesses had to withhold amounts from an employee’s paycheck each time they ran payroll, then later submit the proper PAYG withholding on either monthly or quarterly reporting dates. With single touch payroll, reporting happens at the exact same time that payroll is run, so employers can take care of it all at once and not have to worry about additional reporting dates.

Minimized errors

Because both wage and withholding data are reported to the government at the same time, this reduces the chance for error. The use of online payroll software also means these calculations are automated, reducing the potential for human error and in calculations and data entry.

Reduced paperwork

Single touch payroll necessitated the switch to online payroll software, so it’s no longer possible to run manual payroll, which eliminated a lot of paperwork. With STP, the Australian tax office will also automatically track the figures and then make them available via the online portal, meaning employers don’t have to generate and distribute payment summaries to employees at the end of each financial year.

Access to new employee information

Previously, employers had to wait for their new employees to provide tax file numbers and superannuation information before they could run payroll. Now that STP is in place, employers can simply go to the online portal to look up this information for themselves, improving access to new employee information.

Improved compliance

By automating so much of the reporting process, single touch payroll improves compliance. Not only are businesses submitting the most up-to-date information more frequently, they also don’t have to worry about accidentally missing a reporting deadline.

Implementation of single touch payroll

Implementation of single touch payroll is easy, as long as your software is actually STP compliant. Pretty much all major payroll providers, such as QuickBooks released STP updates when the rulings went into effect, so most platforms should be able to accommodate this. However, if you are new to paying employees via payroll software, you should still double-check that they’re STP compliant before signing the contract. You might also need to turn on STP report sharing, depending on the payroll software.

After you get the software all set up, you will run your payroll, paying your employees as normal and giving them their usual payslip. After payroll is finished, the STP-enabled software will compile a report with all of the necessary information and then automatically send it to the Australian taxation office. If you are using a third-party tax agent, they will review your payroll information and handle your STP reporting on your behalf. Once the tax office has the reports in hand, they will be matched to employer and employee records to ensure accuracy.

Impact of single touch payroll on employers and employees

For employers, single touch payroll means they must use an online payroll provider to run payroll and file their STP reports. Single touch payroll also got rid of end payment summaries and reduced paperwork for employers. There were also some additional changes that were more granular, such as the disaggregation of gross income amounts and unincorporated paid leave from gross earnings.

For employees, single touch payroll means they can now access all of their year-to-date tax and superannuation data through the online portal. The data is updated with every STP report, meaning every time payroll is run. Previously, this information was only recorded once at the end of the financial year and was not regularly updated.

Frequently asked STP questions

What is the concept of single touch payroll?

Under single touch payroll, payroll reports are automatically sent to the Australian government each time a business runs payroll. Companies no longer need to generate and file separate reports on a monthly or quarterly basis.

Who is required to use single touch payroll?

Every Australian business with employees must use single touch payroll, regardless of how many workers they pay.

What is the single touch payroll summary?

Single touch payroll summaries are used to report employees’ salaries, wages, super contributions and pay-as-you-go (PAYG) withholding to the ATO.

What are the disadvantages of single touch payroll?

Since single touch payroll software is fully automated, the system can make it difficult to implement changes such as adding deductions or credits after employees have been hired. The single touch payroll process also requires payroll data to be hosted by an external provider, which can raise concerns around data storage and security.