What is Single Touch Payroll (STP) Reporting: Definition, Importance, and How it Works

The Single Touch Payroll reporting is an Australian government initiative to bring a significant change to Australia’s payroll system. It has been introduced by the Australian Taxation Office to streamline business reporting obligations to enhance transparency and efficiency. 

If you are an employer in Australia, understanding what is Single Touch Payroll is essential for your business to maintain compliance. 

This regulated digital reporting system was introduced in 2018 for large enterprises having an employee strength of over 20 employees. From July 2022, it became mandatory for every company to report the essential data through Single Touch Payroll. 

What is Single Touch Payroll (STP)? 

A Single Touch Payroll (STP) meaning can be simply defined as a regulated digital reporting system that is used to automate the salaries, wages, and payroll of employees to the Australian Taxation Office (ATO). 

This digital reporting system is the Australian Government’s payroll initiative, in which employers must report their employees’ remuneration and salary details directly to the ATO each time payroll processing occurs. 

The employers have to automate the remuneration details, including wages, salaries, Pay-As-You-Go Withholding (PAYGW), and superannuation liability payments. The Australian government aimed to bring significant change with the introduction of STP, as it would simplify access to avail of tax and superannuation information for employees.  

How the Single Touch Payroll Reporting System Works

Single Touch Payroll simply works by transmitting the employees’ wages, tax, and superannuation details from the employers’ STP-enabled payroll or accounting software to the ATO when the salaries are disbursed. 

STP doesn’t require changing the pay scale, as it is an automated reporting system that works when employers run their payroll. It is used to streamline the data of employees’ salaries, along with the withholding and superannuation liability information. 

There are several ways for the employer to send the STP data, including with STP-enabled software, a registered tax or BAS agent, or with the use of a registered payroll service provider.  

7 Key Benefits of Using Single Touch Payroll (STP) 

The Single Touch Payroll is an automated system that was implemented by the Australian government to revolutionize the payroll system by seamlessly integrating employment details and tax declarations into one digital reporting system. 

This payroll system brought multiple key benefits for the Australian government and the employers. Some of them are listed below. 

• The major advantage of using the Single Touch Payroll system is that it streamlines and simplifies the data reporting process. This happens as the employers have control of real-time reporting, as they can send the data at the same time the payroll runs.

• STP helps in reducing the administrative burden of employers, as with the use of STP, employers can automate their reporting process to the ATO with minimal errors and miscalculations.

• This digitalized reporting system can help businesses maintain capital savings, as it lowers the use of different reporting processes.

• Single Touch Payroll equips employers with compliance flexibility, as with its use, the majority of the reporting process gets automated with minimal risk of getting any penalties. 

• With the use of STP, organizations can reduce the paperwork load, as they don’t have to run any manual payroll.

• Employees get numerous benefits as well, including easy access to all their payroll and tax information, including their salaries, pay-as-you-go withholding, and superannuation. 

• Organizations can ensure that their business and employees are tax compliant with the use of STP. 

Why the STP System was Introduced and What is Single Touch Payroll Phase 2

The Australian Government’s major aim of introducing STP was to simplify the reporting process through the automation of the annual summary report. It is a part of their digital transformation to ensure the business and employees are tax compliant without the need to use multiple reporting processes. 

During the 2019-20 budget, the Australian government announced the Single Touch Payroll Phase 2, with an aim to expand the primary Single Touch Payroll reporting system. The primary objectives of introducing the STP Phase 2 include:

• Removal of the previous year-end rush to generate two annual summary reports to send to the ATO. As with the introduction of STP, businesses can smoothly submit their payroll reporting and maintain compliance. 

• It benefits the employers, as they don’t have to send employees’ tax file number declarations (TFN) and provide employment information, including pay slips. 

• Employees profit the most from STP, as with the use of myGov, they get instant access to every single employment financial detail, including tax deductions, salary, PAYGW, and superannuation. 

• Lump sum E-payments, allowances, total income, and additional charges, including Employment Basis Cessation, will be further classified into different categories in STP. 

• STP helps in creating a strong and efficient financial ecosystem by reducing manual data entry and providing real-time reporting with great accuracy.

• It will help in increasing efficiency by streamlining employment and taxation conditions, and with the latest option to include previous business management software IDs and payroll IDs. 

• STP Phase 2 aims to bring significant changes to the existing STP reporting, with a breakdown of the gross amount and the introduction of new payment types.

• Businesses now have an increased option to include the child support deduction and garnishment in their STP report. 

How to Report Single Touch Payroll (STP) Data?  

Since the Single Touch Payroll system is an advanced reporting process that flawlessly integrates the employees’ financial information into a single digital system, understanding the Single Touch Payroll meaning becomes essential to understand how you can send STP data. 

However, in some cases, STP reporting is not required and will terminate when the business comes to a closure. It will also cease in situations when the business is no longer hiring employees or there is no further pending payment of employees for the rest of the year. 

This digital system is designed to meet the reporting requirements of different businesses, irrespective of their employee strength. There are multiple ways through which the companies send their STP data to ATO; a few of them include: 

• Businesses can send their STP data with the use of existing payroll or accounting software. These can be used by organizations with over 20 employees or small companies with 5–19 employees. 

• Organizations can enroll for STP-enabled software to send their STP data. This suits micro-employers as well, with 1–4 employees, with some quarterly concessions and available special considerations. 

• Apart from using STP-enabled software, employees can use a third-party agent, including a registered tax and BAS agent or a registered payroll service provider, to send the required STP data. 

Limitations of Single Touch Payroll (STP) Reporting 

While Single Touch Payroll has revolutionized Australia’s digital economy strategy, it also brings certain limitations and risks. Some of these are listed below. 

• Companies currently facing financial difficulties will be at risk, as they must provide the ATO with immediate information regarding their employees’ financial data. 

• Those employers who fail to pay the PAYG tax and superannuation due to financial difficulties might face harsh decisions from the government for recovery. This includes a Director Penalty Notice and even a Garnishee Notice. 

• Since the Single Touch Payroll reporting system is a fully automated process, the government might face the limitation of updating the changes and deductions after the hiring of an employee. 

• Data integrity and privacy might be concerning factors, as well as the payroll data requires an external provider to host data in Single Touch Payroll. 

Conclusion 

Single Touch Payroll has had a significant impact on the employees and employers, as this digital reporting system has brought numerous benefits and assisted in streamlining the reporting process to the ATO. 

It helps employers send the essential information easily, without the hassle of preparing manual payment summaries. Employees profit the most from STP, as all of their payroll information is available on the myGov website, which gets updated after every pay cycle. So, it was all about single touch payroll, hope now you know what is single touch payroll.