What is Single Touch Payroll; A Comprehensive Guide

Single Touch Payroll (STP) is an Australian government initiative aimed at simplifying payroll reporting obligations for employers. Also, the ATO provides resources and assistance to help employers transition to Single Touch Payroll. This includes STP-compliant software and understanding reporting requirements. Here’s a detailed explanation of what Single Touch Payroll is and how it works.

What is Single Touch Payroll

Single Touch Payroll is a streamlined way for employers to report employees’ payroll information to the Australian Taxation Office (ATO directly from their payroll or accounting software each time they pay their employees. This reporting happens automatically and electronically. Thus, eliminating the need for a separate reporting process.

Purposes of Single Payroll

The main purposes of Single Touch Payroll are:

Simplification

Single Touch Payroll aligns payroll reporting with regular payroll processes. It. It ensures that payroll information is reported accurately and in real time. Thus, reducing the administrative burden on employers.

Compliance

Single Touch Payroll provides timely and accurate data on employee wages, superannuation, and tax withheld. Thus, helping employers comply with their reporting obligations to the ATO.

Enhanced Data Matching

It enables the ATO to cross-check employer-reported data with employee data. Thus, improving data accuracy and reducing errors in the tax and super systems.

Benefits of Single Touch Payroll

• Single Touch Payroll reduces the risk of errors in payroll reporting through automated data transmission.
• It integrates payroll reporting with existing business processes. Thus, saving time and effort.
• It provides employees with access to up-to-date information about wages and superannuation.

How Does Single Touch Payroll Work?

Payroll Software

Businesses need to use STP-enabled payroll software. This software captures payroll information each pay cycle.

Data Capture

Every time employees are paid, the payroll software collects the necessary information. This includes salaries, wages, PAYG withholding, and superannuation contributions.

Reporting

The collected data is automatically sent to the ATO as soon as the employees are paid. This can be done on or before the payday.

ATO Processing

The ATO receives the payroll data in real time and updates the record for each employee. This allows the ATO to keep accurate and up-to-date information about employees’ earnings and tax obligations.

Employees Access

Employees can access their payroll information through their myGov account. This includes year-to-date earnings and superannuation contributions. This provides greater transparency and allows employees to monitor their financial information more closely.

End-of-Year Finalization

At the end of the financial year, employers need to make a financial declaration through their payroll software. This is to confirm that the information reported throughout the year is correct. This replaces the need to issue payment summaries to employees. This is because most of the information has already been reported to the ATO throughout the year.

Suggested Read: End of Financial Year Tax Tips for Australians​​

Single Touch Payroll Implementation and Expansion

Single Touch Payroll was initially rolled out on 1 July 2018. It mandated compliance for employers with 20 or more employees. This requirement was then extended to include employers with 19 or fewer employees from 1 July 2019. From these dates onwards, all employers in Australia are obliged to use STP to report payroll information to the Australian Taxation Office.

On 1 January 2022, the scope of data collected through STP was significantly broadened by introducing STP Phase 2. This expansion entails the collection of more detailed payroll information. Thus, providing a more comprehensive understanding of payroll activities and employee entitlements.

How to Set up Single Touch Payroll

Implementing Single Touch Payroll requires careful planning and the right tools. Here’s a step-by-step guide to help businesses set up STP.

Understand STP Requirements

Before Setting up STP, it’s important to understand the reporting requirements. Report:

• Employee payments (wages, salaries, bonuses)
• PAYG withholding amounts
• Superannuation contributions

Choose STP-enabled Software

You need payroll software that supports STP. Following are some popular options:

Xero

This software is famous for its user-friendly interface and comprehensive features for small to medium businesses.

MYOB

This software offers robust payroll and accounting solutions suitable for various business sizes

Quickbooks

It provides easy-to-use payroll features integrated with its accounting software.

Reckon

It provides cloud-based payroll solutions with STP capabilities.

Sage

Sage is famous for its reliable payroll and accounting software that is suitable for larger enterprises.

Register with the ATO

To start reporting through STP, you need to notify the ATO:

Business Portal:

• Log in to the ATO Business Portal using your myGov ID.
• Go to the Manage Employees section and select Single Touch Payroll.
• Provide your software provider details and software ID (SID). You will get your SID from your payroll software.

Software Registration

Some payroll software providers can register your business with the ATO as part of the setup process. Check if your provider offers this service.

Set up Payroll Software

Now that you have registered, set up your payroll software through the following steps:

1. Install the software using the instructions provided by the software vendor.
2. Enter your business details (ABN, contact information)
3. Input your employee details. This includes name, address, TFN, pay rate, and superannuation details.
4. Configure payroll settings such as pay cycles (weekly, fortnightly, monthly), PAYG withholding, and superannuation funds.
5. Enable STP reporting in your software settings.
6. Enter the SID provided by the ATO if not already done.

Test Your Setup

• Perform a test pay run to ensure that all data is captured correctly.
• Check that PAYG withholding and superannuation calculations are accurate.

Conduct a Live Pay Run

Once testing is complete, conduct your first live pay run:

• Enter pay details for your employees.
• Process the payroll.
• Submit the STP report to the ATO.

Bottomline

Ready to simplify your payroll process? Start setting up Single Touch Payroll today with the right STP-enabled software. Don’t wait. Embrace the future of payroll reporting now!

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