What STP actually requires, why Phase 2 catches so many small businesses out, and how it now connects directly to your super obligations under Payday Super.
Single Touch Payroll sounds like one of those compliance terms that only matters at tax time — in reality, it affects every single pay run. If you employ even one person in Australia, STP isn’t optional, and getting the setup wrong doesn’t just create reporting headaches, it now has a direct line to your superannuation obligations too. This guide explains what STP actually is, what Phase 2 changed, and what small employers need to get right.
Single Touch Payroll is the ATO’s system for reporting payroll information in real time, rather than annually. Each time you run payroll, your STP-enabled software sends the ATO details of wages, PAYG withholding, and superannuation directly — no separate end-of-year payment summaries, and no manual reporting event required outside your normal pay run.
Employees benefit too — their year-to-date income becomes visible through their own ATO online account, updated as each pay run is processed.
STP Phase 2 expanded what’s reported with every pay event. Instead of sending one lump “gross pay” figure, employers now need to break payroll down into specific, itemised categories, including:
STP Phase 2 also replaced the paper TFN declaration — employee tax details are now captured through the STP-enabled software itself.
The most common issue isn’t a lack of compliant software — most modern payroll platforms handle STP Phase 2 reporting correctly out of the box. The problem is usually what sits behind the software: pay items that were set up under old Phase 1 logic and never revisited. A bonus paid through a generic “other income” category, an allowance lumped into ordinary wages, or a director’s payment coded as standard salary — none of these throw an error, but all of them report incorrectly to the ATO.
Under quarterly superannuation reporting, an incorrectly coded pay item was a data quality issue the ATO might eventually query. From 1 July 2026, under Payday Super, that changes. Super now needs to be paid in line with every pay run rather than quarterly, and the ATO uses STP Phase 2 data to monitor whether the super paid matches what was actually owed — in close to real time.
In practice, this means the income type and allowance coding on your payroll isn’t just a reporting formality anymore. It’s the exact data the ATO uses to work out your correct super guarantee liability and check it against what actually landed in your employee’s fund. A miscoded pay item is no longer just a compliance detail — it can flow straight through into a super payment discrepancy.
Many small employers manage STP themselves without issue once the initial setup is right. Where it’s worth bringing in a bookkeeper is at the point of hiring your first employee, adding a more complex pay structure like overtime or allowances, or realising the payroll categories haven’t been reviewed since they were first set up. Getting the coding right once, rather than correcting it retrospectively, is almost always the cheaper path.
Yes. STP data must be sent through ATO-recognised, STP-enabled payroll software or a digital service provider — spreadsheets or manual reporting are not compliant options under Phase 2.
Phase 1 reported total gross pay, PAYG withholding and super each pay run. Phase 2 requires that gross pay be broken down into specific categories — overtime, allowances, bonuses and lump sums — along with income type and employment basis detail.
Employers must finalise STP for each employee by 14 July following the end of the financial year, confirming the year-to-date figures reported are complete and correct.
From 1 July 2026, super must be paid in line with each pay run rather than quarterly, and the ATO uses STP Phase 2 data to check the super paid against what was actually owed — which means accurate payroll coding now directly affects super compliance, not just payroll reporting.
