What Is Single Touch Payroll

The ATO introduced STP to make payroll reporting more efficient, transparent, and accurate. It reduces the burden on small businesses and ensures employees receive the right entitlements at the right time.

The key goals of STP include:

• Simplifying compliance: Less paperwork and fewer end-of-year reporting headaches.
• Improving transparency: The ATO receives payroll data instantly, helping detect and prevent errors or missed super payments.
• Supporting small businesses: Reduces duplication and helps keep your reporting obligations up to date automatically.

How Does Single Touch Payroll Work?

When you process your pay run using STP-enabled accounting software (like Xero, MYOB, or QuickBooks), the system automatically sends your employees’ income, tax, and superannuation details to the ATO.

At the end of the financial year, instead of issuing traditional payment summaries, employees can access their income statements directly through myGov, making tax time simpler for everyone.

STP Phase 2: What’s New?

The ATO rolled out STP Phase 2 to further reduce reporting duplication for employers. This update expands the data reported through STP to include additional details such as:

• Employment types (e.g. full-time, part-time, casual)
• Income stream classifications
• Lump sum payments
• Child support deductions
  

For businesses, this means even greater accuracy and less manual reporting to different government agencies.

Benefits of Using Single Touch Payroll

Implementing STP correctly can offer a range of benefits to your small business, including:

1. Time Savings – Automates reporting so you spend less time on manual payroll tasks.
2. Improved Accuracy – Reduces errors in PAYG and super reporting.
3. Compliance Confidence – Keeps your business in line with ATO regulations.
4. Better Employee Experience – Employees can see their pays and tax details updated instantly in myGov.
5. Simplified End-of-Year Processing – Eliminates the need for group certificates or payment summaries.

How to Set Up Single Touch Payroll

If your business hasn’t yet transitioned to STP or STP Phase 2, here’s how to get started:

1. Check your software: Ensure your payroll or accounting software is STP-compliant.
2. Update employee records: Make sure all details (like TFNs and super funds) are correct.
3. Connect with the ATO: Link your software through the ATO Business Portal or your software provider.
4. Start reporting: Each time you process payroll, your data will automatically be sent to the ATO.

If you’re unsure whether your setup meets ATO requirements, it’s best to work with a professional bookkeeper who can manage compliance for you.

How to do Single Touch Payroll in Xero

If you’re using Xero accounting software for your payroll, setting up and lodging Single Touch Payroll (STP) is straightforward. Xero is fully STP Phase 2–compliant, meaning it automatically reports your employees’ pay, tax, and super details to the ATO every time you complete a pay run.

Here’s how to do STP in Xero:

1. Check your setup: Make sure all employee information (like tax file numbers, addresses, and super details) is accurate in Xero.
2. Enable STP reporting: In Xero, go to Payroll Settings > Single Touch Payroll and follow the prompts to connect Xero to the ATO.
3. Process a pay run: Run payroll as usual. Once finalised, Xero will automatically prepare your STP report.
   
4. File with the ATO: Submit your STP report directly through Xero with a single click. The system confirms once the ATO has received it.
5. Review regularly: Keep an eye on your payroll reports in Xero to ensure data accuracy and compliance across every pay cycle.
   

With payroll in Xero, everything is integrated from superannuation payments to year-end income statements. Employees can easily view their pay and tax details in myGov, while business owners gain peace of mind knowing their reporting is always up to date.

Simplify Payroll with Profit Services

At Profit Services, we help Sydney small businesses stay compliant and stress-free with accurate bookkeeping and payroll management. From Single Touch Payroll setup to ongoing BAS lodgements and cash flow reporting, we ensure your financial processes run seamlessly.

Need help setting up or managing STP for your business? Contact Profit Services today, and let’s make payroll simple.