What Is Single Touch Payroll (STP) and How Does It Work?

Australian payroll has undergone a major transformation over the past few years. What was once an end-of-year reporting obligation is now a real-time, system-driven compliance process.  

At the centre of this shift is Single Touch Payroll (STP) — a mandatory framework that requires employers to report payroll data to the Australian Taxation Office (ATO) every time they pay their employees, forming a key part of their payroll and employer obligations. Since its expansion under Phase 2, STP is no longer just about submitting payroll data. It is about getting the structure, classification and timing right in every pay run.  

In this article, we break down how STP works today, what employers must report and how latest changes such as Payday Super are shaping payroll obligations in Australia in 2026.  

What is Single Touch Payroll?

Single Touch Payroll (STP) is a government-mandated system that requires employers to report payroll data to the ATO every time they pay their employees. Instead of submitting information annually through payment summaries, businesses report in real time using STP-enabled payroll software.  

STP is mandatory for all employers in Australia, regardless of size or industry. This includes small businesses, growing companies and international organisations hiring locally.  

STP turns compliance into an ongoing process rather than a once-a-year task. Each time payroll is processed, the data flows directly to the ATO, giving the government near real-time visibility into wages, tax and superannuation obligations across the workforce.  

STP Phase 2

Single Touch Payroll Phase 2 is now the standard reporting framework for all employers in Australia. Introduced from 1 January 2022, it expanded the amount of payroll data businesses must report, with most organisations completing their transition between 2023 and 2025. Instead of reporting a single total for employee pay, employers must now provide a breakdown of different payment types, such as salary, overtime, allowances, bonuses and leave. 

Different types of income are treated differently for tax, superannuation, and employee entitlements, so errors in categorisation can have wider downstream impacts. In practice, this places greater importance on accurate payroll setup, consistent processes, and ongoing monitoring of payroll data.

What Must Employers Report Under STP?

Under current single touch payroll requirements, each pay event must include: 

• Income components (disaggregated) 
  • Gross salary or wages 
  • Overtime 
  • Bonuses and commissions 
  • Allowances (with specific ATO-defined codes for car, travel, meals and other types) 
  • Leave payments (annual, personal, long service – reported separately) 
  • Pre-sacrifice amounts and salary sacrifice (reported separately since Phase 2) 
• Employment and tax information 
  • Income type (salary and wages, closely held payee, labour hire, working holiday maker, foreign employment, etc.) 
  • Tax treatment codes 
  • Employment basis (full-time, part-time, casual) 
  • Country codes for employees on foreign income 
• Other obligations 
  • PAYG withholding amounts 
  • Superannuation liability (the amount owed not confirmation of payment) 
  • Termination reason (mandatory in Phase 2 when an employee’s employment ends) 
  • Child support deductions, where applicable 

One important distinction: STP reports the super liability i.e., what is owed, not confirmation that super has actually been paid to the fund. This distinction becomes more significant under the Payday Super reforms described below. 

How the STP Reporting Process Works

The single touch payroll reporting process runs through your payroll software each pay cycle: 

1. Your STP-enabled software calculates employee pay, tax and superannuation 
2. A pay event is submitted to the ATO on or before each payday 
3. Employees can view their up-to-date income and tax information via myGov 
4. At the end of the financial year, employers must finalise each employee’s income statement through STP by 14 July 

That last step of EOFY finalisation, is a compliance obligation that is often overlooked. Whatever is in your STP data at the point of finalisation flows through to employees’ myGov accounts and pre-fills their tax returns. Errors in your STP reporting carry through directly, making accuracy throughout the year essential. 

In our experience, the challenge is rarely about submitting STP reports. More often, it is about correctly configuring payroll systems and mapping payroll categories under STP Phase 2.  

Why STP Compliance Matters More Now?

The ATO has increased compliance focus on STP reporting including penalties applied for late lodgements, incorrect formats, or misleading reporting. In March 2026, ATO issued a draft of new penalties for non-compliance in STP reporting.  

STP data now feeds into employee tax returns, Services Australia welfare assessments, and ATO compliance monitoring. Errors have consequences beyond payroll as they affect employees’ government benefit calculations, their tax pre-fills and your business’s compliance profile. 

The shift in posture is clear: accurate, timely and correctly structured STP reporting is now a baseline expectation, not an aspiration. 

 STP & Payday Super 

With the introduction of Payday Super on 1 July 2026, STP now plays an even more central role in payroll compliance. 

Under these changes, superannuation must be received by the employee’s fund within seven business days of each payday, replacing the current quarterly payment cycle. STP reports Qualifying Earnings (QE) and the SG liability on each payday, giving the ATO near real-time visibility of whether super is being paid correctly and on time. 

This creates a direct, visible link between what you report in STP and whether your super obligations are being met. For employers, the practical implications are: 

• Payroll, finance and superannuation processes must operate much more closely together, as superannuation can no longer be managed separately on a quarterly basis. 
• Payroll categorisation must be accurate, as QE calculations are based on STP-reported data. 
• Any misclassification of income types in STP will flow through to incorrect super calculations. 

Common STP Mistakes Employers Make

Common issues we see include: 

• Incorrect allowance coding; 
• Misclassification of contractors and employees; 
• Incorrect salary sacrifice reporting; 
• Inconsistent treatment of bonuses; 
• Payroll software mapping errors after system upgrades; 
• Late EOFY finalisation; and
• Incorrect reporting for internationally mobile employees. 

For international companies establishing operations in Australia, STP compliance often intersects with payroll, taxation, superannuation and broader employer obligations, making payroll outsourcing an increasingly popular option for managing compliance risk.  Ensuring payroll systems are correctly configured from the start can help avoid costly reporting corrections later. 

Conclusion

Single Touch Payroll is a core component of payroll compliance in Australia. With the transition to STP Phase 2 complete, the focus has shifted from adoption to accuracy, consistency and accountability.  

As payroll continues to evolve, particularly with the introduction of Payday Super, STP will play an even greater role in how businesses meet their obligations. Employers can no longer view payroll reporting as an administrative task alone. It is a critical part of maintaining compliance, reducing risk and ensuring employees receive their correct entitlements.  

Whether you are hiring your first employee in Australia, managing a growing Australian workforce, now is the time to review your payroll systems and reporting practices are fit for purpose. 

Backed by 30 years of experience supporting international businesses entering and growing in Australia, Polyglot Group understands the practical challenges employers face in meeting payroll compliance obligations and adapting to regulatory change.  

Get in touch with our team today to discuss your STP reporting obligations and ensure your payroll processes are ready for latest compliance and regulatory requirements in Australia. 

FAQs

Disclaimer: This information is provided as general guidance only and does not constitute tax advice. You should consult a qualified professional before making any financial or tax-related decisions.