Last updated: 16 October 2026. Written by the FreeMyCloud team.
Checked against the ATO What STP is, STP reporting options, Disaggregation of gross, Closely held payees, End-of-year finalisation and About Payday Super pages, and the Fair Work Ombudsman Pay slips and Record keeping pages, on 16 October 2026.
- STP is mandatory: it started 1 July 2018 for employers with 20 or more employees, 1 July 2019 for smaller ones.
- STP Phase 2 began 1 January 2022, splitting gross into eight separately reported components.
- Finalisation is due 14 July, or 30 September for closely held payees, or the payee’s tax return due date for a small employer with only closely held payees.
- From 1 July 2026 you report qualifying earnings as well as super liability, and pay super within seven business days of payday.
- STP does not replace pay slips: Fair Work requires one within one working day of payment, and records kept seven years.
Most Australian employers now run Single Touch Payroll without thinking about it, because the software does the sending. The problems turn up elsewhere: a pay code mapped to the wrong STP Phase 2 category two years ago, a director drawing money all year with no decision about how it is reported, or a terminated casual left out of the finalisation. None stop the payroll running, and all land on an employee’s income statement.
This article covers what Single Touch Payroll reports, who had to start and when, what STP Phase 2 split apart, the options for closely held payees, the finalisation dates, and the Fair Work obligations STP does not touch.
What is Single Touch Payroll, and what is STP?
STP is the abbreviation for Single Touch Payroll, an Australian Government initiative that sends payroll information to the ATO from payroll software when the payroll is run. The ATO’s What STP is page (last updated 1 September 2021) lists what gets reported: salaries and wages, pay as you go (PAYG) withholding, and superannuation liability information.
The mechanics are deliberately undramatic: you run your payroll, pay your employees, give them a pay slip, and your pay cycle does not change. Two consequences matter more. Employees see their year-to-date tax and super figures through myGov every time you report, so a coding error is visible to them long before anyone reconciles. And the data is shared with Services Australia, so a misclassified allowance can reach a family’s Family Tax Benefit estimate.
Once amounts are reported and finalised through STP, you do not provide payment summaries or lodge a payment summary annual report for them. For anything not reported through STP, both obligations still apply. Source: ATO, End-of-year finalisation through STP, 16 October 2025.
Who has to do single touch payroll reporting, and when did it start?
Single touch payroll reporting is mandatory for every employer. The ATO’s STP reporting options page (last updated 14 November 2024) sets out the start dates, and states that all employers should now be reporting under STP Phase 2 unless they hold a deferral.
| Employer | STP started | Position as at 16 October 2026 |
|---|---|---|
| 20 or more employees | 1 July 2018 | On or before each pay day, including closely held payees |
| 19 or fewer employees | 1 July 2019 | Reporting now, with concessions for closely held payees |
| 1 to 4 employees (micro) | 1 July 2019 | May seek a quarterly concession through a registered agent, in exceptional circumstances only |
| New employers | On first paying an employee | Start through STP Phase 2 enabled software straight away |
The headcount rule catches people out, because it is not a payroll count. It counts full-time, part-time and casual employees, employees overseas and anyone on leave, but excludes former employees, contractors, labour hire staff, office holders and closely held payees. So a business with three full-timers, one part-timer and two directors is a micro employer with four. Whether your people are employees at all is a separate test, in our post on contractor versus employee in Australia. The ATO’s Need more time page covers deferrals and exemptions.
What does STP reporting send to the ATO each pay day?
Each STP report carries year-to-date figures for every employee paid in the financial year, not just that period’s amounts. That is why a mapping error compounds: every later report restates the same wrong total until someone fixes the pay code underneath. It covers the payments split into their Phase 2 components, the PAYG withholding, the super liability or qualifying earnings, and each person’s employment and taxation conditions.
That last part used to live on paper. Under STP Phase 2 the employee’s employment basis, TFN declaration details, and the date and reason they left all travel in the report. That is why you no longer send TFN declarations to the ATO, and why omitting a cessation date and reason is on the ATO’s list of common mistakes. The ATO’s How to report Single Touch Payroll data page covers the routes it can take.
What the report does not do is calculate anything for you. The figures are only as good as the pay codes behind them, which is ordinary weekly work rather than a software setting. It is most of what our outsourced payroll services team does: run the pay cycle, check the report against it, and keep the mapping correct.
What changed under STP Phase 2?
STP Phase 2 began on 1 January 2022 and expanded the data collected, so employers reporting to several agencies report once. The ATO’s Expanding Single Touch Payroll (Phase 2) page (last updated 22 December 2022) is explicit about what did not change: the way you lodge, the due date, the payments reported, your tax and super obligations, and finalisation.
What changed is the shape of the data, across six areas: disaggregation of gross, employment and taxation conditions, income types, country codes, child support, and payroll IDs.
What does single touch payroll phase 2 require you to report separately?
Single touch payroll phase 2 replaced the single gross figure with eight separately reported amounts. The ATO’s Disaggregation of gross page (last updated 12 November 2025) lists them, and only pre-sacrifice amounts classified as ordinary time earnings belong in gross.
| Separately reported component | What sits in it, and the common trap |
|---|---|
| Gross | Ordinary hours, shift and public holiday penalties, piece rates, flat daily rates and flexi time. Rostered days off and time off in lieu belong in paid leave. |
| Paid leave | Six types: other (O), parental (P), workers compensation (W), ancillary and defence (A), cash out in service (C), unused on termination (U). |
| Allowances | Reported by type. Travel and overtime meal allowances below the ATO’s reasonable amounts are correctly not reportable. |
| Overtime | Hours outside ordinary hours. Breach of rest break payments use overtime rates but are ordinary hours. |
| Bonuses and commissions | Separated from gross. Commissions sit inside qualifying earnings from 1 July 2026. |
| Directors’ fees | In scope, unlike trust distributions, dividends or loans. |
| Lump sum W | Return to work payments. |
| Salary sacrifice | Reported separately with the pre-sacrifice amount, reversing Phase 1. |
Income types sit alongside those amounts and tell the ATO how the income should be treated. Most reporting uses SAW, salary and wages, with the rest identifying people taxed differently or under a concession, including CHP for closely held payees and WHM for working holiday makers.
The two errors the ATO flags most often are both setup errors: marking amounts “not reportable” when they should be reported, and failing to carry year-to-date continuity across from Phase 1, which in the ATO’s own example made an employer look like it had withheld no PAYG withholding at all. If your file was mapped in a hurry in 2022, start there.
How do closely held payees get reported through STP?
A closely held payee is an individual directly related to the entity paying them: a family member of a family business, a company director or shareholder, or a beneficiary of a trust. Since 1 July 2021 amounts paid to all payees have had to be reported through STP. The ATO’s Small employers, closely held (related) payees page (last updated 5 September 2022) sets out the concession, which is only for small employers with 19 or fewer payees. An employer with 20 or more reports them exactly as it reports arm’s length employees, who in every case must be reported on or before pay day.
The threshold question is not who was paid but how the payment is classified, because only amounts subject to withholding and in scope for STP get reported. Salary, wages and directors’ fees are in scope; a trust distribution, a dividend and a loan from the business are not. So where a director’s drawings are recorded as a loan and discharged by a directors’ fee at month end, only the fee is reported.
| Reporting option | How it works | Suits |
|---|---|---|
| Actual payments on or before the date of payment | Report at or before each pay event | A fee set at a known amount on a known date |
| Actual payments quarterly | One report each quarter the activity statement is due, only where there was a reportable payment | Irregular payments a few times a year |
| Reasonable estimate quarterly | Estimate the quarter’s payments and report that, in every quarter | Drawings classified as wages, reconciled at year end |
Either quarterly option leaves the rest of the calendar intact: PAYG withholding still goes on the activity statement by its due date, and super by its own deadline, which is not the same date. Where circumstances have not materially changed, the ATO will generally accept an estimate of 25% of last year’s total at quarter one, rising to 100% at quarter four.
You need not tell the ATO which method you chose, but you must report the payee under the CHP income type if you use a quarterly option or intend to finalise after 14 July. Our guide to who does what between a bookkeeper, a BAS agent and an accountant covers which decisions need a registered agent, and the BAS due dates for 2026-27 and ATO due dates pages carry the dates.
What is STP finalisation, and when is it due?
STP finalisation is the declaration that your reporting for the financial year is complete. Once made, each employee’s income statement is marked “tax ready” and they or their agent can use it to lodge; until then it shows “not tax ready”. The dates differ by payee type, per the ATO’s End-of-year finalisation through STP page (last updated 16 October 2025).
| Who you are finalising | Due date |
|---|---|
| Employees generally | 14 July each year |
| Closely held payees, where you also have arm’s length employees | 30 September, arm’s length employees still 14 July |
| Closely held payees, small employer with no other employees | The payee’s own tax return due date |
| Closely held payees, employer with 20 or more employees | 30 September each year |
Three mistakes account for most finalisation problems, all on the ATO’s list: finalising the wrong financial year, because the declaration is usually lodged after 30 June; leaving people out, when it must cover everyone paid during the year, including terminated employees and casuals; and changing payroll software mid-year without zeroing the old file, which duplicates income.
What does Single Touch Payroll mean for super under Payday Super?
From 1 July 2026 the super rules changed and the STP report is doing more work. The ATO’s About Payday Super page (last updated 10 August 2026) sets out the shift: contributions must reach the employee’s fund within seven business days after payday, with exceptions such as new employees, in place of 28 days after the quarter.
Two changes land in payroll data. Super guarantee is now 12% of qualifying earnings rather than ordinary time earnings, a wider base taking in all commissions and salary sacrifice contributions. And where an employer previously reported either ordinary time earnings or super liability through STP, you now report both. The 12% rate has applied since 1 July 2025, per the ATO’s How much super to pay page (last updated 25 February 2026).
From 1 July 2026 employers no longer lodge a super guarantee statement. The ATO assesses the charge from the STP report matched against fund reporting, and calculates it on qualifying earnings. It is now tax deductible, and penalties are 25% or 50% of the unpaid charge. Source: ATO, About Payday Super, 10 August 2026.
The practical effect is that a bonus or commission pay code is no longer only a tax-time question: it sits inside the qualifying earnings figure the ATO uses to work out what you owed, on a seven business day clock. We set out the deadline mechanics in our post on Payday Super in Australia, and the quarterly dates on the super due dates page.
What counts as STP software, and how do you choose it?
STP software is any payroll or accounting product that can send an STP Phase 2 report to the ATO. The ATO does not endorse products, but it maintains a product register that its STP reporting options page points employers to. Xero, MYOB, QuickBooks and Reckon all report under STP Phase 2, and we compare the two largest in our post on Xero versus MYOB for Australian payroll.
Reporting a previous Business Management Software ID when you migrate is optional in the standard, and it is what prevents duplicate income statements. If you already run a major product, the work is in the mapping rather than the migration, which our Xero bookkeeping services and MYOB bookkeeping services pages cover. Our comparison of the best accounting software in Australia covers what each costs.
Does single touch payroll software replace pay slips?
No. Single touch payroll software reports to the ATO. It does not discharge your Fair Work obligations. The Ombudsman’s Pay slips page requires a pay slip within one working day of paying an employee, and lists what must be on it: the ordinary hourly rate and hours worked at it, any loadings, allowances, bonuses or penalty rates that can be separated out, every deduction with the account it went to, and the amount and fund of super contributions. Infringement notices apply where pay slips are missing or incomplete.
The record-keeping rules run alongside. Under the Fair Work Ombudsman’s Record keeping page, employers must keep time and wages records for seven years, legible and in English, and make them available on request, including after an employee has left, under Fair Work Act 2009 sections 535, 536 and 539. What a pay slip must carry is close to what STP Phase 2 reports separately, so a file mapped correctly for one is usually close to correct for the other. Penalty rates are the clearest example, in our post on hospitality payroll in Australia, and leave loading in annual leave loading in Australia.
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Frequently asked questions
What single touch payroll ATO guidance applies to small employers?
The ATO’s STP reporting options page is the starting point for employers with 19 or fewer employees, and the closely held payees page covers the concessions available to them. Small employers report arm’s length employees on or before each pay day, and may report closely held payees on or before payday, quarterly on actual payments, or quarterly on a reasonable estimate. Micro employers with one to four employees may also seek a quarterly concession through a registered agent, granted only in exceptional circumstances.
When is single touch payroll finalisation due?
Single touch payroll finalisation is due by 14 July each year for employees generally. Where you have closely held payees as well as arm’s length employees, the closely held payees are due by 30 September and the arm’s length employees are still due 14 July. A small employer with only closely held payees has until that payee’s own tax return due date. If you cannot meet the date, apply for a deferral rather than lodging late.
Do you still need to give employees a payment summary?
Not for amounts you reported and finalised through STP. Once the finalisation declaration is made, the employee’s income statement in ATO online services is marked tax ready and you do not provide a payment summary or lodge a payment summary annual report for those amounts. For any payment that was not reported through STP, you still provide a payment summary to the employee and send a payment summary annual report to the ATO.
What happens if you do not report through STP?
STP has been a mandatory obligation since the transition periods closed, so an employer that has not started reporting, or has not transitioned to STP Phase 2, and does not hold a deferral or exemption may be subject to failure to lodge penalties. The ATO says it may contact an employer first and apply penalties if reporting does not start within a reasonable time. Deferrals and exemptions are available and are applied for in advance.
Can a registered agent do your STP reporting for you?
Yes. A registered tax agent, a registered BAS agent or a payroll service provider can report on your behalf, and that is one of the three routes the ATO sets out for employers without STP-enabled software of their own. The obligation remains the employer’s. A bookkeeper who is not a registered agent can prepare and run the payroll, but the lodgement services a registered agent provides are a separate thing, which is the distinction most businesses need to get right when they set the arrangement up.
Does STP replace Fair Work record keeping?
No. STP is a reporting obligation to the ATO. The Fair Work Act obligations are separate and continue in full: a pay slip within one working day of payment containing the prescribed detail, and time and wages records kept for seven years, legible and in English. Fair Work Inspectors can issue infringement notices where records or pay slips are missing or wrong, and in some cases an employer without records has to prove to a court that it did not underpay.
This article is general information about Australian bookkeeping and reporting obligations, current as at 16 October 2026. It is not tax, financial or legal advice. FreeMyCloud is not a registered tax or BAS agent and does not prepare or lodge tax returns or activity statements. Rates, thresholds and dates change. Confirm your own position with your registered tax or BAS agent.
