Personal Income Tax

Single Touch Payroll

By reporting payroll information directly to the ATO with the Single Touch Payroll (STP) system, the business is no longer required to submit payroll summaries or provide annual reports and tax file number details separately.  The ATO is giving employers the first year as a “grace period” in which the employers will not be penalized for a past due STP report.

During the STP transition, please remember the following:

  • As of July 1, 2018, employers with twenty or more employees will be required to start reporting through the STP system. 
  • To decide if an employer is required to report using the STP, they must record their employee count on April 1, 2018. This is discussed in further detail below.
  • Every time employees are paid, employers are required to report regular salary or wages, pay as you go (PAYG) withholding, and super guarantee details.
  • Employers have the option to allow employees to submit their tax file number (TFN) declarations and super standard choice forms online themselves.
  • Employer payroll software will be required to be updated a STP-supported version.
  • If the employer’s payroll software already supported STP, they have actually been able to report payroll information since July 1, 2017.

Employee End-of-Year Payroll Information

Employers that submit an employee’s payroll details through STP will not be required to give an annual payment summary to that employee or the ATO at the end of the fiscal year.

Employers are required to inform the ATO when their payment summary information is completed.  The ATO will then use the myGov portal to provide that information to the employees (and their tax agent, if applicable) and pre-fill their information onto their tax return. 

So with all these changes coming in, how should employers prepare?

Employer To-Do List

Step 1: Determine the number of employees on April 1, 2018

The number of employees on payroll on April 1, 2018 will determine if the employer is considered a “substantial employer.”   If the employer has 20 or more employees on that date, they will need to submit reports through STP.

How to determine who is/is not an employee

In determining who is or is not an employee, include the following in your employee total:

  • full-time employees
  • part-time employees
  • casual employees on payroll by April 1 who worked any time in March
  • employees based overseas
  • employees that are absent or on leave (paid or unpaid)
  • seasonal employees (those who are employed only short-term to support a regular peak workload, i.e., harvest workers)

 But exclude the following:

  • any employee whose employment was terminated before April 1
  • casual employees that did not work during March
  • independent contractors
  • employees provided by a third-party staffing firm
  • company directors
  • office holders
  • religious practitioners.

Step 2: Update payroll software

Payroll software and service providers are currently updating their products. An approved software product list can be found on the Australian Business Software Industry Association (ABSIA) website. The list updates as payroll solutions are updated and become STP-compatible.

Employers may want to consult their payroll software provider for more information regarding the updated product and its availability. 

Step 3: Start reporting through Single Touch Payroll

Employers may begin reporting via the STP as soon as their payroll solution is updated.

As with any changes, employers may take a while to wrap their heads around the new system, and in the process, may worry about the consequence of non-compliance. However, there is no need to worry. Just remember the following:

  • Employers will not be fined. Employers will not be fined for late reports during the first 12 months following July 1, 2018 without a written notice from the ATO that future late reports may result in a penalty.
  • Mistakes are okay. When an employer starts reporting through their STP-enabled payroll solution, any errors can be amended in a later STP report.
  • PAYG withholding payments are flexible. Employers will continue to have the option to pay their PAYG withholding more often if they wish (i.e., with staff payroll). Nevertheless, current payment due dates remain unchanged.  

 If you’re still unsure what to do or how this will affect your business, speak to your tax advisor.


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