STP - Single Touch Payroll - definition & overview

Single Touch Payroll, commonly referred to as STP, is a revolutionary system introduced by the Australian Taxation Office (ATO) to streamline the way employers report their employees' tax and superannuation information. This system, which is mandatory for all employers in Australia, has been designed to simplify the payroll process and ensure greater transparency in the reporting of salary or wages, PAYG withholdings, and superannuation.

The STP system is a significant leap forward in the digitisation of payroll processes, offering a seamless and efficient solution for businesses to stay compliant with their payroll reporting obligations. It is a system that not only simplifies the payroll process but also ensures accuracy and timeliness of information, which is crucial for both employers and employees.

Understanding STP

STP is a digital payroll reporting system that requires employers to send their employees' tax and superannuation information to the ATO each time they run their payroll and pay their employees. The information is sent directly from the payroll software to the ATO in a 'digital payroll event'. This means that employers no longer need to complete payment summaries at the end of the financial year as the ATO will have all the necessary information.

The primary purpose of STP is to provide the ATO with real-time visibility over the accuracy and timeliness of employers' payroll processes. This enables the ATO to identify and address non-compliance, including underpayment of employees' entitlements, more effectively.

Benefits of STP

STP offers numerous benefits for both employers and employees. For employers, it simplifies the end-of-year reporting process by eliminating the need for payment summaries. It also ensures that employers are compliant with their payroll obligations, reducing the risk of penalties and fines.

For employees, STP provides greater visibility over their income and superannuation information. They can view their year-to-date tax and superannuation information online at any time, which can help them manage their finances more effectively. Furthermore, it ensures that they receive their entitlements in full and on time.

STP Reporting

STP reporting is done every time an employer runs their payroll. The payroll software will send the tax and superannuation information directly to the ATO in a digital payroll event. This information includes salary or wages, PAYG withholdings, and superannuation.

Employers can choose to send the STP information themselves or they can use a third party, such as a registered tax or BAS agent or payroll service provider, to send the information on their behalf. However, it's important to note that the employer is still ultimately responsible for the accuracy and timeliness of the STP information.

Implementing STP

Implementing STP requires careful planning and preparation. Employers need to ensure that their payroll software is STP-enabled. They also need to understand their reporting obligations and establish a process for sending the STP information each time they run their payroll.

It's important for employers to communicate with their employees about the changes and what they mean for them. This includes explaining how employees can access their tax and superannuation information online and what they need to do at the end of the financial year.

STP-Enabled Payroll Software

Having STP-enabled payroll software is a key requirement for implementing STP. The software needs to be able to send the tax and superannuation information directly to the ATO in a digital payroll event. There are many STP-enabled payroll software solutions available in the market, so employers need to choose one that best fits their needs.

When choosing an STP-enabled payroll software, employers should consider factors such as the size of their business, the complexity of their payroll process, and their budget. They should also consider the software's ease of use, customer support, and integration with other business systems.

Reporting Obligations

Under STP, employers have an obligation to report their employees' tax and superannuation information to the ATO each time they run their payroll. This includes salary or wages, PAYG withholdings, and superannuation. Employers need to ensure that they understand these reporting obligations and that they have a process in place to meet them.

It's important for employers to keep accurate and up-to-date records of their employees' tax and superannuation information. They also need to ensure that they send the STP information on time, as late or inaccurate reporting can result in penalties and fines.

Challenges of STP

While STP offers many benefits, it also presents some challenges for employers. These include the need to upgrade or change their payroll software, the need to understand and meet their reporting obligations, and the need to communicate with their employees about the changes.

However, with careful planning and preparation, employers can overcome these challenges and successfully implement STP. They can also seek help from professionals, such as registered tax or BAS agents or payroll service providers, to ensure that they are compliant with their STP obligations.

Software Upgrade or Change

One of the main challenges of implementing STP is the need to upgrade or change the payroll software. Not all payroll software is STP-enabled, so employers may need to switch to a different software solution. This can be a complex and time-consuming process, especially for businesses with a large number of employees or a complex payroll process.

However, there are many STP-enabled payroll software solutions available in the market, so employers have a wide range of options to choose from. They can also seek advice from professionals to help them choose the right software solution for their business.

Understanding and Meeting Reporting Obligations

Another challenge of implementing STP is understanding and meeting the reporting obligations. STP requires employers to report their employees' tax and superannuation information to the ATO each time they run their payroll. This can be a significant change for businesses that are used to reporting this information at the end of the financial year.

However, with the right knowledge and processes in place, employers can meet their STP reporting obligations effectively. They can also seek help from professionals to ensure that they are compliant with their STP obligations.

Conclusion

STP is a significant change in the way employers report their employees' tax and superannuation information. While it presents some challenges, it also offers many benefits, including simplifying the payroll process, ensuring greater transparency in reporting, and helping employers stay compliant with their payroll obligations.

With careful planning and preparation, and with the help of professionals, employers can successfully implement STP and reap its benefits. It's a step forward in the digitisation of payroll processes, offering a seamless and efficient solution for businesses to stay compliant with their payroll reporting obligations.