What is Single Touch Payroll?
Single Touch Payroll (STP) is a method that allows employers to directly report payroll information to the Australian Taxation Office (ATO). Across this article, we¡¯ll cover a simple breakdown of STP, explain its purpose, how it operates and the key benefits for both employers and government agencies.
What does Single Touch Payroll mean?
Single Touch Payroll is a simple and efficient way for employers to report employee payroll information directly to the ATO. This means that instead of submitting large reports at the end of the year, employers can send payroll details to the ATO every time they pay their employees ¨C whether it¡¯s weekly, fortnightly or monthly.
Single Touch Payroll is a system designed to support both employers and the government. It makes payroll management easier for businesses by reducing paperwork and automating the reporting of wages, tax withholdings and superannuation contributions. For the ATO, real-time reporting ensures that accurate information is received quickly, helping to process taxes and superannuation smoothly.
How does Single Touch Payroll work?
Single Touch Payroll works by connecting an employer's payroll system directly to the ATO. Each time an employee is paid, important details like wages, tax and superannuation are automatically sent in real-time. This happens at the push of a button during each pay run (hence the name) and eliminates the need for manual reporting or the filing of payroll information at the end of each financial year. It means payroll information is reported timely and accurately, making the process easier for employers while reducing paperwork and the risk of mistakes.
The process for Single Touch Payroll is:
- Employers process payroll as usual
- Employers pay employees and provide them with a pay slip
- The payroll software automatically sends a report to the ATO, including details like:
a) Employee wages and salaries
b) PAYG tax withholding
c) Superannuation contributions
What do employers include in Single Touch Payroll reports?
When employers use Single Touch Payroll, they are required to regularly submit certain details about their employees to the ATO. This reporting process includes several key components:
- Employee wages: How much an employee earns before tax. This includes regular pay as well as bonuses, commissions and allowances.
- Tax withholdings: The amount of tax deducted from their wages. This ensures the correct amount of tax is being collected and forwarded to the ATO on behalf of each employee.
- Deductions: These might include voluntary contributions to superannuation, union fees or other personal deductions the employee has authorised. Any deductions from an employee¡¯s pay need to be included in the report.
- Superannuation: The employer¡¯s contributions to the employee¡¯s superannuation fund. Employers are also required to report the superannuation contributions they make on behalf of their employees.
In some cases, employers may also need to include additional information in their Single Touch Payroll reports. This could include any corrections that need to be made for previously submitted pay details. The system keeps all this information up to date and maintains accuracy and transparency, preventing potential issues or inaccuracies in payroll information.
How often do you report with Single Touch Payroll?
Under the Single Touch Payroll system, employers must report employee payroll details to the ATO each time employees are paid. This usually occurs on a weekly, fortnightly or monthly basis, depending on the payroll cycle. Once set up in the payroll system, reporting happens automatically, streamlining the process and removing the need for manual submissions.
Is Single Touch Payroll compulsory?
Within most businesses in Australia, Single Touch Payroll is mandatory. It was first introduced in 2018, and now, most employers are required to use the system. If you haven¡¯t started using Single Touch Payroll yet, it¡¯s important to get it set up as soon as possible. Not doing so could result in penalties or compliance issues with the ATO.
When is Single Touch Payroll not required?
Some businesses may not need to report through Single Touch Payroll. This may apply if you¡¯ve stopped employing staff, shut down your business, changed your business structure or don¡¯t plan to pay any employees for the remainder of the financial year. It¡¯s important to check with the ATO or a tax professional if you¡¯re unsure.
Are there any Single Touch Payroll exemptions?
Some employers may be eligible for exemptions from Single Touch Payroll reporting for a particular financial year. These exemptions generally apply to small businesses with 19 or fewer employees and can be granted under specific conditions such as:
- Low digital capability
- Limited or unreliable internet access or operating in areas with no internet service
Additionally, exemptions may also be granted to employers impacted by exceptional or unforeseen circumstances. Employers can submit applications themselves or through a registered tax or BAS agent. It's important to seek professional advice to determine eligibility.
Are there penalties for not using Single Touch Payroll?
Failing to use Single Touch Payroll could result in penalties, fines or legal actions from the ATO ¨C with fines up to $1,110 per violation and interest on unpaid superannuation. Non-compliance could also result in increased audits and difficulties accessing taxpayer benefits.
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