Single Touch Payroll Explained: What Every Employer Must Do

The moment you pay your first employee, you take on a reporting obligation many new employers have never heard of: Single Touch Payroll. It's not optional, not annual, and not something you can do on paper. Here's what STP is, how you comply, and what changes now payday super has arrived.

What Single Touch Payroll actually is

Single Touch Payroll (STP) is the ATO's system for collecting payroll information in real time. Every time you run a pay — weekly, fortnightly, monthly, whatever your cycle — your payroll software sends the ATO a report showing each employee's salary and wages, the tax you withheld, and the super you owe them. It happens on or before each payday, automatically, as part of processing the pay run.

That's the whole concept: instead of telling the ATO about wages once a year, you tell them every pay run. The ATO uses that data to pre-fill your activity statements, monitor super payments, and give your employees a live view of their income in myGov. It's been mandatory for all employers since 1 July 2019 — there's no opting out and no paper alternative for a normal business.

Who has to report

Every employer. There's no minimum employee count — if you pay one part-time casual, you report through STP. It covers full-time, part-time and casual staff, directors receiving salary or directors' fees, and working holiday makers, whether you operate as a sole trader, company or trust.

You don't report payments to genuine contractors invoicing through their own ABN — STP is about employees and PAYG withholding. (If you're not sure whether someone's an employee or contractor, sort that out first; getting it wrong causes much bigger problems than STP.)

Closely held payees: the family business rules

A closely held payee is someone directly connected to the entity that pays them — family members working in the family business, directors or shareholders of the company, beneficiaries of a trust. The ATO knows these people often aren't paid a tidy fortnightly wage; amounts are frequently determined after year-end with the accountant.

So small employers (19 or fewer payees) get concessions for closely held payees. You can choose to report them:

Option	How it works	Deadline
Real time	Report each actual payment on or before payday, same as regular staff	Each payday
Quarterly actuals	Report actual amounts paid each quarter	Your quarterly BAS due date
Quarterly estimate	Report a reasonable estimate — at least 25% of the payee's prior-year gross and withholding each quarter	Your quarterly BAS due date

Your arm's-length employees (regular staff) must still be reported every payday — the quarterly concession only covers the closely held people. And if you have 20 or more payees, no concession: everyone gets reported each payday. The quarterly options line up with your activity statement cycle, so check the BAS due dates calendar if you're using them.

STP Phase 2 in plain English

STP Phase 2 has been the standard since 2022, and its big idea is disaggregation — instead of reporting one lump "gross" figure per employee, your software breaks the pay into components:

Gross (ordinary salary and wages)
Paid leave — annual, personal, cashed out
Allowances — each one categorised (tools, travel, laundry, overtime meals and so on)
Overtime
Bonuses and commissions
Directors' fees
Salary sacrifice — reported separately, with gross shown pre-sacrifice
Lump sums — termination and back payments

Phase 2 also reports each employee's income type (regular salary, working holiday maker, foreign employment income), tax treatment and employment basis. The payoff for you: no more sending separate TFN declarations to the ATO — that information travels inside your STP reports. And Services Australia gets income data straight from payroll, so employees dealing with Centrelink don't have to prove their income separately.

You don't build any of this yourself. Your job is to set each pay item up correctly in your software — flag overtime as overtime, categorise each allowance, mark salary sacrifice properly — and the software handles the rest. Sloppy pay item setup is the most common Phase 2 problem, so it's worth an hour with a bookkeeper or BAS agent to check yours.

How you actually report

STP reporting only happens through STP-enabled software. Your realistic options:

Your situation	Typical solution
Already using Xero, MYOB or QuickBooks	Payroll is built in or a cheap add-on — switch it on and you're STP-ready
Micro employer (1–4 employees), watching every dollar	A product from the ATO's no-cost and low-cost STP register
Don't want to touch payroll at all	A registered tax or BAS agent reports on your behalf

The mainstream accounting packages — Xero, MYOB, QuickBooks — all include STP-compliant payroll, and if you're already doing your books in one of them, that's almost always the path of least resistance. Our accounting software comparison covers what each costs.

If you've got one to four employees and don't need full accounting software, the ATO maintains a register of no-cost and low-cost STP solutions built specifically for micro employers — simple payroll tools, some free for a single employee or your first few employees, others charging a small subscription. The register lives on the ATO's software developers site (search "no-cost and low-cost STP solutions"); products come and go, so check the current list rather than old blog posts.

Whichever tool you pick, you connect it to the ATO once — your software walks you through it — and from then on every pay run reports automatically.

What your employees see

STP killed the annual payment summary — what older employees still call the group certificate. You don't issue one. Instead, each employee has an income statement in ATO online services, reached through their myGov account, updated every time you run a pay. After you finalise at year end it's marked "tax ready" and pre-fills their tax return. If an employee asks where their group certificate is: myGov, and wait until it says tax ready before lodging.

End-of-year finalisation: the 14 July deadline

STP replaces the old annual reporting, but there's still one end-of-year job: the finalisation declaration. This is you telling the ATO "these year-to-date figures are complete and correct" for each employee, which flips their income statement to tax ready.

Who	Finalisation deadline
Arm's-length employees	14 July
Closely held payees (where you also have regular staff)	30 September
Closely held payees only (small employer)	The payee's own tax return due date

Finalisation is a few clicks in your payroll software, but reconcile first: do the STP year-to-date figures match your payroll records and wages ledger? Fixing errors before finalisation beats issuing amendments after employees have already lodged their returns.

Fixing mistakes

Everyone fat-fingers a pay run eventually. STP is built to cope:

Year-to-date self-correction. STP reports year-to-date figures, so many errors simply wash through — fix the amount in your software and the next pay event reports the corrected totals. No separate form, no phone call.
Corrections have timeframes. The ATO expects you to fix errors promptly once spotted — generally in your next regular pay event, or via your software's "update event" function if there's no pay run coming soon.
Overpaid an employee? The rules differ depending on whether they repay you in the same financial year or a later one — run this one past your accountant.
Already finalised? You can un-finalise, correct, and re-finalise. Do it quickly and tell affected employees, because their pre-filled tax return data changes.

The ATO's posture on honest mistakes is genuinely reasonable: fix them promptly and you're very unlikely to be penalised. The trouble comes from not reporting at all.

Exemptions and concessions still current in 2026–27

Genuine exemptions are narrow:

WPN holders — employers with a withholding payer number instead of an ABN (typically non-business employers) are exempt from STP reporting until 30 June 2033. From 1 July 2026, a WPN holder who chooses to report voluntarily can only do so through a registered tax or BAS agent.
No internet or unreliable connection — you can apply to the ATO for an exemption if you genuinely can't report digitally.
Micro employer quarterly reporting — a concession letting 1–4 employee businesses report quarterly through a registered agent still exists, but only for exceptional circumstances. It's not a general opt-out.
Closely held payee concessions — covered above, and still current.

If you think you qualify for an exemption, document your reasoning or apply through the ATO — don't just quietly stop reporting.

Penalties if you don't comply

Failing to lodge STP reports attracts the ATO's failure-to-lodge penalty: one penalty unit for each 28 days (or part thereof) a report is overdue, capped at five penalty units for small entities. With the Commonwealth penalty unit at $364 (as at August 2026), that's up to $1,820 per late report for a small business.

In practice, the ATO's pattern with small employers has been warnings first — pre-penalty letters giving you 28 days to start reporting or make contact. But the ATO released fresh guidance in 2026 on administering STP penalties, and the grace-period era is over: STP is eight years old and "I didn't know" no longer flies. If you've fallen behind, contacting the ATO before they contact you makes an enormous difference.

How payday super changes your pay runs

From 1 July 2026, payday super is law — the legislation passed in November 2025. Every pay run now has a third leg:

Pay the wages
Report through STP (as always)
Pay the super — contributions must reach each employee's fund within 7 business days of payday

Quarterly super is gone, and the STP connection is the cross-checking: super is now calculated on "qualifying earnings" and paid every cycle, and the ATO matches your STP reports against what actually lands in employees' funds. That matching is why STP data quality matters more than ever — a miscoded pay item can flag you as underpaying super.

Payday super changes plenty beyond your STP reports too — the ATO's free clearing house has closed, late payments cost far more than the old super guarantee charge, and super is now a per-pay-run cash flow item rather than a quarterly lump. For the full rundown of what's changed this financial year, see our guide to payroll in 2026–27.

Key takeaways

STP means reporting wages, tax withheld and super to the ATO on or before every payday, through STP-enabled software — every employer, even with one employee.
Small employers (19 or fewer payees) can report closely held payees (family, directors, beneficiaries) quarterly instead of every payday.
STP Phase 2 reports pay in components — overtime, allowances, bonuses, salary sacrifice — so set your pay items up correctly in your software.
Employees see a live income statement in myGov; finalise your STP data by 14 July each year so it shows as tax ready.
Not reporting can cost a small business up to $1,820 per late report (as at August 2026) — and the ATO's warning-letter era is winding down.
From 1 July 2026, payday super means super must reach employees' funds within 7 business days of each payday, and the ATO matches fund data against your STP reports.

Where to get help

ATO — Single Touch Payroll — the definitive rules, concessions and finalisation guidance
ATO — About payday super — how the new super timing works with your pay runs
business.gov.au — plain-language employer obligations checklists
Fair Work Ombudsman — pay rates, payslip and record-keeping rules that sit alongside STP
Your accountant or a registered BAS agent — worth an hour of their time to check your pay item setup and closely held reporting choices