What is single touch payroll?
Single touch payroll (STP) is a new way for Australian business owners to report tax and superannuation information to the Australian Tax Office (ATO). Rather than providing this information to the ATO annually, single touch payroll requires that tax and super information is automatically shared each time you run your payroll.
How does single touch payroll work?
If you use STP-ready online payroll software such as Xero or MYOB, your employees’ tax and super information will be sent to the ATO automatically each time you run your payroll – aside from some initial set-up, there’s nothing extra for you to do.
If you use a desktop or manual (e.g. pen and paper) process for managing your payroll, you’ll need to find a ‘sending service provider’ – someone who will convert your payroll reports into the ATO’s required format and submit them on your behalf.
In the past, small businesses would summarise their tax and super payments to the ATO as part of their end of financial year reporting. Employers were required to provide:
- An annual payment summary report, detailing how much the business paid in wages, the PAYG withheld, and the super contributions they’d made that financial year
- A payment summary for each employee, detailing how much that employee received in wages, the payroll taxes collected from their pay, and the superannuation contributions their employer made on their behalf during that financial year
With single touch payroll, there’s no need for employers to complete either of these documents.
When do I need to start using STP?
Single touch payroll came into effect on 1 July 2018 for businesses with more than 20 employees.
Employers with 19 or less employees will need to start using STP between 1 July and 30 September 2019; if your business needs more time to get ready to report through STP, you can apply to the ATO for a deferral.
How should I count my employees for STP?
When counting employees for STP purposes, you should include each employee, not their full-time equivalent (FTE). Your headcount should reflect the total number of people on your payroll, and should include:
- Full-time employees
- Part-time employees
- Casual employees
- Employees based overseas
- Any employee who is absent or on leave (paid or unpaid)
How do I switch to STP?
To meet your STP obligations, you’ll need to submit tax and super information online, using a specific format known as standard business reporting (SBR). Depending on how you run your payroll today, you might need to change software provider or find someone to produce compliant reports for you:
- If you use online payroll software like Xero or MYOB, these providers should be set up for STP. You can check whether your software provider is STP compliant at the Single Touch Payroll product register on the government website.
- If you use desktop payroll software, you’ll need to find a provider who can convert your payroll reports into the ATO’s required format and submit them on your behalf.
- If you use manual methods such as spreadsheets or pen and paper, you’ll need to find a provider who can convert this information into standard business reporting format and submit it on your behalf.
Single Touch Payroll FAQs
Do I need to change my payroll frequency for STP?
No, there is no need to make any changes to your payroll frequency due to STP.
I only have two employees – do I need to use STP?
If your business employs between one and four employees, you’re classified as a ‘micro employer’ and can use a range of no-cost and low-cost (less than $10 per month) STP solutions developed specifically for businesses like yours.
A list of free and low-cost STP solutions that can be used by businesses with between one and four employees is available on the ATO website.
If you’re a micro employer and currently use a registered tax or BAS agent, you can report your STP quarterly rather than each time your payroll is run for the first two years from 1 July 2019.
If I don’t pay one of my employees during a pay period, should they be included in my STP reporting?
There’s no need to include employees with no earnings during a pay period in your STP reporting, but there’s no issue if you do.
Do I still need to submit a BAS if I’m using STP?
Yes, you’ll still need to submit a business activity statement, however some fields will be pre-populated (but editable) if you complete your BAS online.
Do I need an AusKey to use STP?
Whether you need an AusKey will depend on the type of payroll software your business uses. You can speak to your bookkeeper or accountant regarding your specific situation.
What if I’m not ready for STP by 30 September 2019?
You can apply for a transitional deferral if you need more time to get ready to report through STP, whether this is because your software provider isn’t ready or you simply need more time to transition your business to the STP approach.
You can also ask for a deferral due to unreliable or no internet service. You’ll need to provide evidence that this impacts your ability to report through STP.
There are a number of other deferral types available; these are explored in detail on the ATO website.
Can I apply for an STP exemption?
There are three different types of STP exemptions:
- Exemptions for the financial year
- Exemptions for reporting on certain employees
- Other exemptions (assess on a case-by-case basis by the ATO)
Detailed information about these exemptions is available on the ATO website.
This article does not constitute legal advice. If you have specific questions about your payroll reporting obligations, please consult a professional.