Single touch payroll: what it means and how it works

Published Wednesday 22 April 2026

Table of contents

• What is single touch payroll?
• Who must use single touch payroll?
• How to count employees for STP
• What changed with single touch payroll?
• What are the benefits of single touch payroll?
• What information do you need to report?
• STP Phase 2: What you need to know
• How often do you report payroll?
• What to do at year-end: Finalisation declarations
• How to get started with single touch payroll
• How Xero simplifies single touch payroll
• FAQs on single touch payroll

Key takeaways

• Recognize that single touch payroll is mandatory for all Australian employers with at least one employee, regardless of business size, so you must report wages, tax withheld, and super to the ATO after every pay run using ATO-approved software.
• Submit your STP report on or before each pay day to match your pay cycle, and complete a finalisation declaration by 14 July each year so your employees can access their income statements and lodge their tax returns on time.
• Ensure your payroll software meets STP Phase 2 requirements, which means reporting additional data fields such as employment type, tax treatment codes, and income types with every pay run since 1 January 2022.
• Use STP-compliant payroll software to cut admin, reduce errors, and track your PAYG and super obligations in real time, eliminating the need to prepare payment summaries or annual reports at year-end.

What is single touch payroll?

Single touch payroll (STP) is Australia's mandatory system for reporting employee wages, tax withheld, and super to the ATO each time you run payroll. Instead of submitting annual reports, you send data digitally after every pay run. STP requires:

• Real-time reporting: Submit data after each pay run instead of annually
• Digital submission: Use ATO-approved software in Standard Business Reporting (SBR) format
• Automated workflow: Integrate reporting directly into your normal payroll process

Who must use single touch payroll?

Yes, STP is mandatory for all Australian employers regardless of business size or how many employees you have. Since 1 July 2019, every employer with at least one employee must report through STP unless the ATO grants a specific exemption.

This applies whether you have full-time, part-time, or casual staff. You need an STP-compliant payroll solution to report each time you run your pay cycle.

How to count employees for STP

Your STP headcount includes everyone you pay, not just full-time staff. Count all individuals on your payroll on any given day:

• Full-time employees
• Part-time employees
• Casual employees
• Any other paid workers

Even one employee triggers the STP requirement. There is no minimum threshold.

What changed with single touch payroll?

STP replaced annual payment summaries with real-time digital reporting. You no longer need to prepare payment summary annual reports or individual employee payment summaries because the ATO receives data after each pay run.

Your employees can access their year-to-date tax and super information directly through their myGov account. This updates automatically each time you file a pay run.

Following an announcement in the 2019–20 Budget, the system expanded with STP Phase 2 from 1 January 2022, which requires additional data fields.

What are the benefits of single touch payroll?

STP reduces admin and gives you a real-time view of your payroll obligations. While it's a compliance requirement, it also delivers practical benefits for your business.

Key benefits include:

• Reduced year-end paperwork: No more preparing payment summaries or annual reports
• Self-service access for employees: Staff can view their tax and super information anytime through myGov
• Reduced errors: Real-time reporting catches mistakes early instead of at year-end
• Saved time: Automated reporting means less manual data entry
• Improved tracking: Track your PAYG and super obligations as you go

For employees, STP means faster access to their income statements at tax time. The ATO pre-fills their tax returns using the data you submit each pay run.

What information do you need to report?

Each STP report must include specific payment details so the ATO maintains an accurate, real-time record of your payroll obligations. Learn more about hiring and paying your workers on the ATO website.

You must report:

• Salaries and wages: Gross pay for each employee, reported under BAS label W1
• PAYG withholding: Tax amounts withheld from employee pay
• Superannuation: Super liability based on ordinary time earnings (OTE) for each employee

STP Phase 2: What you need to know

STP Phase 2 expanded the data you report to the ATO. Since 1 January 2022, employers must include additional information with each pay run.

Phase 2 added new reporting fields including:

• Employment type: Full-time, part-time, casual, or labour hire classification
• Tax treatment codes: The method used to calculate tax for each employee
• Income types: Breakdown of salary and wages by category
• Country codes: Location data for employees working overseas

The ATO uses this extra data to pre-fill employee tax returns and improve compliance across the system. Most STP-enabled software updated automatically to handle Phase 2 requirements.

If you're unsure whether your software is Phase 2 compliant, check with your provider or visit the ATO's STP Phase 2 page for detailed specifications.

How often do you report payroll?

Report to the ATO on or before each pay day. Your reporting frequency matches your pay cycle:

• Weekly pay: Report weekly
• Fortnightly pay: Report fortnightly
• Monthly pay: Report monthly

If a pay cycle crosses into the new financial year, report the payment by 30 June in the year it was made.

What to do at year-end: Finalisation declarations

A finalisation declaration confirms you've finished STP reporting for the financial year. This is a required step that tells the ATO your employees' income statements are complete and ready for tax time, though different deadlines apply for closely held payees.

Key finalisation requirements:

• Deadline: 14 July each year to ensure your employees can complete their tax return
• Method: Your STP-enabled payroll software
• What it confirms: All salary, wages, tax, and super reported for each employee

Once you finalise, your employees can access their income statement through myGov and use it to lodge their tax return. The ATO pre-fills their return using the data you've submitted throughout the year.

If a pay run crosses 30 June, report the payment in the financial year it was made. Then include those amounts in your finalisation for that year.

How to get started with single touch payroll

How you start with STP depends on how your payroll is currently set up. Choose the reporting method that matches your system:

• Online payroll software: Verify your software is STP-enabled and produces ATO-compliant reports
• Desktop payroll software: Use a submission service to convert and upload reports in the required format
• Manual systems (spreadsheets or paper): Engage a service provider to convert your data and submit compliant digital reports

If you don't have an accountant or bookkeeper, find one experienced with STP-compliant software through the Xero Advisor Directory.

How Xero simplifies single touch payroll

Xero Payroll is fully STP-compliant, so you can report pay, tax, and super to the ATO as part of your normal pay run.

Xero simplifies STP by:

• Automatic calculations: Pay, taxes, and super are calculated for you
• Report generation: STP reports are created ready for your approval
• Direct filing: Submit to the ATO in the same workflow as your pay run

This means less admin and more time for your business. Get one month free to try Xero's STP reporting.

FAQs on single touch payroll

Here are answers to some common questions about single touch payroll.

What is single touch payroll?

Single touch payroll (STP) is Australia's mandatory system for reporting employee wages, tax withheld, and super to the ATO each time you run payroll.

Do I need to use single touch payroll?

Yes. STP has been compulsory for all Australian employers since 1 July 2019, regardless of how many employees you have.

Is Xero single touch payroll compliant?

Yes. Xero Payroll is fully compliant with STP Phase 2 requirements. You can file employee pay, tax, and super information directly with the ATO after each pay run.