Every time you pay your staff, the ATO expects to hear about it, on the same day, automatically. That is Single Touch Payroll, and if you employ people in Australia it is not optional. And once your total Australian wages grow past the state threshold, you may also face payroll tax in Victoria, a separate obligation many growing employers miss.

For most employers it runs quietly in the background through their payroll software. But when it goes wrong, a missed finalisation, a super figure that does not match, an employee who cannot see their income statement in myGov, it lands squarely on the business owner. And with the shift to STP Phase 2, the amount of detail you are reporting has grown.

This guide explains what Single Touch Payroll is, what you must report, the deadlines that matter, and where employers most often trip up. It is written for Melbourne business owners who want payroll to be one less thing to worry about. If you are still setting up, see our complete guide to how to start a business in Australia.

What is Single Touch Payroll (STP)?

Single Touch Payroll is the way employers report payroll information to the ATO. Instead of sending payment summaries once a year, you report each pay run to the ATO at the time you pay your employees, every payday, through STP-enabled software.

Each STP report sends the ATO three key pieces of information for every employee:

• Salaries and wages: what you paid each person;
• PAYG withholding: the tax you withheld from their pay; and
• Superannuation: the super you are liable to pay on their behalf.

Because the ATO receives this in real time, your employees can see their year-to-date pay, tax and super in their myGov account, and their end-of-year income statement is built automatically from your reports.

Who has to use STP?

Effectively every employer in Australia. STP is mandatory for all businesses that pay employees, including small employers with only one or a handful of staff. The concessions that once applied to very small and closely held employers have largely ended, so if you run payroll, you report through STP.

There are still some special arrangements for closely held payees, family members, directors, shareholders and beneficiaries, who can be reported quarterly rather than each payday in some cases. Getting that concession applied correctly is worth a conversation with your accountant.

STP Phase 2: what changed

STP Phase 2 expanded the detail employers report, without changing the way you lodge. The goal is to reduce duplicate reporting to other government agencies, so more information now flows through your pay events. Key changes include:

• Disaggregation of gross: income is now itemised into components such as overtime, bonuses, allowances, paid leave and directors’ fees, rather than a single gross figure;
• Employment and taxation conditions: details like employment basis (full-time, part-time, casual) and the reason employment ended are reported through STP;
• Income type and country codes: each payment is categorised, which matters for closely held payees, working holiday makers and others.

Modern payroll software handles the mechanics, but only if your pay items are mapped correctly. A poorly configured set-up quietly reports the wrong categories all year, something we regularly find and fix during payroll reviews.

The STP deadlines that matter

Report on or before each payday

Your STP report is due on or before the day you pay your employees. For most businesses this is automatic: you finalise the pay run in your software and the report lodges itself.

Finalise by 14 July

After the end of each financial year you must make an STP finalisation declaration, a tick that tells the ATO your figures for the year are complete and correct. The deadline is 14 July. Once you finalise, your employees’ income statements are marked ‘Tax ready’ in myGov and they (or their accountant) can lodge their tax returns with confidence.

Miss the finalisation and your staff see ‘Not tax ready’ against their income, a common source of frustrated phone calls in July. It is a small step that makes a big difference to your team.

Where employers go wrong with STP

• Not finalising by 14 July: the most common issue, and the one your employees notice first.
• Incorrect pay item mapping under Phase 2: allowances or bonuses coded to the wrong category all year.
• Super reported but not paid: STP reports your super liability, but you still have to actually pay it by the due date. The two are separate, and the ATO can see the gap.
• Onboarding new employees incorrectly: wrong tax file number declarations or employment basis flowing into every report.

Because STP feeds the ATO live data, errors are visible almost immediately. That is a good reason to get the set-up right: our Xero Payroll guide covers the software side, and if you are unsure about your super obligations, start with the super guarantee charge.

STP Phase 3 and real-time data-matching: what is coming

You may have seen the term STP Phase 3 used online. It is worth being clear: the ATO has not legislated or formally branded a program called STP Phase 3. What the phrase describes is the clear direction of travel, payroll reporting and compliance moving to real time, backed by increasingly automated data-matching. The mechanics below are already law or already in place, whatever label gets attached to them.

The concrete change is Payday Super. From 1 July 2026, employers must pay super guarantee at the same time as wages on each payday, rather than quarterly, and must report year-to-date qualifying earnings for each employee through their STP reporting every payday. Payroll, PAYG, and super reporting effectively converge into a single real-time stream. You can read the detail on the ATO’s Payday Super pages.

The second shift is how the ATO uses that data. It now matches the payroll information you report through STP against the contribution data super funds report when money reaches an employee’s account. That lets the ATO reconcile, close to real time, whether the right super was paid to the right fund on time, and it surfaces late or short payments almost immediately rather than months later. The same live matching applies to PAYG withholding. In practice, the ATO’s systems increasingly flag discrepancies automatically, which is why some commentators describe this as an AI-driven, real-time approach to payroll compliance.

For employers, the message is simple: the margin for error is shrinking. Late super, mismapped pay items, or figures that do not reconcile will be visible to the ATO quickly, so getting your payroll set-up and payment timing right matters more than ever.

Frequently Asked Questions

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