A Guide to Single Touch Payroll (STP) in Australia
Single Touch Payroll (STP) is a significant change in the way businesses report tax and superannuation information to the Australian Taxation Office (ATO). Introduced to streamline payroll reporting, STP aims to make the process more efficient and transparent. This guide will cover everything you need to know about STP, including its benefits, how it works, compliance requirements, and tips for a smooth transition.
What is Single Touch Payroll (STP)?
Single Touch Payroll (STP) is an Australian Government initiative that requires employers to report their employees' tax and superannuation information to the ATO each time they run their payroll. This means that every payday, employers must send their employees' salary and wage information, PAYG withholding, and superannuation contributions directly to the ATO.
Benefits of STP
1. Streamlined Reporting
STP simplifies the payroll reporting process by integrating it into the payroll cycle. This reduces the need for separate end-of-year payment summaries and group certificates, as the ATO receives the information in real-time.
2. Improved Transparency
With STP, employees can access their year-to-date tax and superannuation information through their myGov account at any time. This increased transparency helps employees stay informed about their entitlements and ensures employers meet their obligations.
3. Reduced Administrative Burden
By automating the reporting process, STP reduces the administrative burden on businesses. There is no need to generate and distribute annual payment summaries to employees or submit annual reports to the ATO.
4. Enhanced Compliance
STP helps ensure compliance with tax and superannuation laws by providing the ATO with timely and accurate data. This can help reduce errors and identify non-compliance more quickly.
How Does STP Work?
1. Payroll Software
To comply with STP, businesses must use STP-enabled payroll software. This software automatically sends the required information to the ATO each time employees are paid.
2. Reporting Requirements
Each payday, the following information must be reported to the ATO via the payroll software:
Employee details (name, Tax File Number)
Gross wages and salary
PAYG withholding amounts
Superannuation contributions
3. End-of-Year Finalisation
At the end of the financial year, employers need to make a finalisation declaration through their payroll software. This step confirms that all reported information for the year is complete and accurate. Employees can then access their income statements through myGov, eliminating the need for employers to provide payment summaries.