Employers used to report payroll information to the Australian Taxation Office (ATO) once a year, but this has changed under a new system called Single Touch Payroll (STP).
STP has been compulsory for all businesses since July 2019.
With STP, every time an employer pays an employee, they are required to send the ATO details of the person’s pay either on that day or the next day.
Those details must be submitted online and includes information such as wages, salary, tax withholdings and superannuation contributions.
This information is then uploaded by the ATO onto the employee’s online myGov account, where they can see their pay details.
Employers with one to four employees have the option to report on a quarterly basis through their registered tax or BAS agent.
How Does Single Touch Payroll Benefit Employers?
Single Touch Payroll has removed a lot of paperwork for employers by digitising the process. Here are the main benefits:
- Streamlines the reporting process: STP allows business owners to submit payroll information either on or soon after a pay run rather than at a much later date. Previously, businesses had to report the PAYG tax withheld from their employees on a monthly or quarterly basis.
- Helps reduce errors: The ATO fills in labels W1 and W2 in the employer’s business activity statements (BAS), which reduces the potential for human error and helps avoid penalties.
- Eliminates annual payment summaries: Employers are no longer required to generate and distribute payment summaries to employees at the end of each financial year. Instead, the ATO uploads the information to employees’ online myGov accounts where it is available for employees and their tax agents to use in preparing their tax returns. This reduces paperwork for employers, saving them time and money.
- Improves filing of new employee information: Employers used to have to send details of new employees and their tax file numbers to the ATO by mail. Now, all they have to do is enter the information into their STP-compliant software and electronically send a report to the ATO, saving a trip to the post office.
How to comply with Single Touch Payroll
The easiest way to ensure your business is STP compliant is to use payroll software that has STP built in. Every time you run your payroll, the system will send the required data to the ATO.
Some of the most well-known STP-compliant software providers include:
- Reckon One
To see a full list of STP compliant software that meets government security standards, check out the Australian Government’s Single Touch Payroll product register.