Running a business means juggling many responsibilities from paying your team on time to keeping up with government reporting changes. One system that has reshaped how payroll is reported in Australia is Single Touch Payroll (STP). If you’ve heard of STP but aren’t sure what it involves, or you’re wondering about the changes introduced with STP Phase 2, this guide breaks it all down in a clear and easy to understand way.
In this article, you’ll learn:
- What Single Touch Payroll is
- Why it matters
- How STP Phase 2 expanded reporting
- The key components and benefits
- How it impacts your business processes
What is Single Touch Payroll (STP)?
Single Touch Payroll is a digital reporting system. Each time a business runs payroll, employee payment information is sent electronically to the government through payroll software. This includes details such as wages, super contributions, and other amounts paid to employees.
Before STP, employers reported employee information once a year using a manual process. STP changed this by requiring reporting to happen in real time with every pay run.
The Core Idea Behind STP
The main purpose of STP is to reduce paperwork, improve accuracy, and simplify reporting. It is now a standard requirement for most employers in Australia.
Rather than submitting multiple forms at different times of the year, relevant payroll information is automatically reported through the payroll system you already use.
Why Single Touch Payroll Matters for Your Business
Single Touch Payroll has changed more than just how payroll information is submitted. It has improved efficiency, accuracy, and transparency for businesses of all sizes. Here’s a closer look at the key advantages and why they matter in day-to-day operations.
Easier Reporting
Before Single Touch Payroll, businesses were required to complete separate employee reporting at the end of the financial year. This often meant gathering payroll records, double-checking figures, completing additional forms, and meeting strict deadlines all while managing normal business operations.
With STP, payroll information is submitted automatically every time you process a pay run. This means:
- There is no separate year-end employee reporting process
- Payroll data is already finalised throughout the year
- Business owners spend less time on paperwork
- Compliance obligations are handled progressively, not all at once
By spreading reporting across the year, STP removes the pressure and administrative burden that traditionally came with year-end payroll tasks. For many businesses, this has made payroll reporting significantly more manageable.
Better Visibility
One of the most valuable benefits of STP is improved visibility of payroll information for both employers and employees.
For business owners, STP provides:
- Clear, up-to-date payroll records at any point in the year
- Better oversight of wages, deductions, and super contributions
- Easier reconciliation of payroll figures with accounting records
For employees, STP offers greater transparency. Instead of waiting until the end of the year for a payment summary, employees can:
- View their year-to-date earnings at any time
- Access updated payroll information through their online government account
- See leave balances and income details more clearly
This visibility helps reduce payroll-related questions, misunderstandings, and disputes, creating a smoother relationship between employers and employees.
Reduced Errors
Manual payroll reporting has always carried the risk of human error. Entering figures multiple times, transferring data between systems, or completing forms manually increases the likelihood of mistakes.
STP reduces these risks by:
- Sending payroll data directly from payroll software
- Eliminating duplicate data entry
- Using consistent figures across all reports
- Reducing reliance on manual calculations
Because information is reported as payroll is processed, errors are often identified earlier rather than months later. If a correction is needed, it can be updated through the payroll system instead of revisiting old records at year end.
The result is more accurate payroll reporting and fewer issues caused by incorrect or inconsistent information.
Real-Time Updates
Traditional payroll reporting often relied on historical data that was reviewed weeks or months after payments were made. STP changes this by ensuring payroll records are updated in real time.
Each time you run payroll:
- Employee payment information is reported immediately
- Records stay current throughout the year
- Changes such as pay increases or employee exits are reflected promptly
- Leave balances and earnings are updated as they occur
Real-time reporting helps businesses maintain accurate records at all times. It also means there is less need to reconstruct payroll history later, saving time and reducing stress.
For growing businesses, real-time updates provide better insight into payroll costs and workforce trends, supporting more informed planning and decision-making.
Understanding STP Phase 2
Single Touch Payroll Phase 2 is an enhancement of the original STP system, designed to provide more detailed and structured payroll reporting. While the initial version of STP focused mainly on reporting total wages and withheld amounts, Phase 2 introduced a more comprehensive approach that reflects how payroll actually works in real business environments.
It is important to understand that STP Phase 2 is not a new or separate reporting system. Businesses that were already using STP did not need to start again. Instead, Phase 2 builds on the existing framework by expanding the type of information reported with each pay run.
The main change is the level of detail required. Rather than reporting broad totals, employers now report payroll information using specific categories and classifications. This ensures that payment data is clearer, more consistent, and easier to interpret throughout the year.
Key Features of STP Phase 2
STP Phase 2 introduced several important updates that expanded the level of detail included in payroll reporting. These changes help ensure payroll information is clearer, more accurate, and better aligned with how employees are paid in real business environments.
1.Detailed Income Categories
Under STP Phase 2, employee payments must be reported using specific income categories instead of being grouped together as one total amount. This provides a clearer picture of how an employee’s earnings are made up and reduces confusion when reviewing payroll records.
Income categories include:
- Ordinary earnings
- Overtime
- Bonuses
- Allowances
- Reimbursements
- Lump sum payments
- Parental leave payments
By breaking payments into these categories, payroll reports become more transparent and easier to understand for both employers and employees.
2.Expanded Employment Details
STP Phase 2 also requires employers to report more detailed information about each employee’s working arrangement. This ensures employee records remain accurate from the start of employment through to its end.
Employment details include:
- Employment type (full-time, part-time, casual, or contractor)
- Start and end dates
- Work location details
- Payment basis, such as hourly or piece rate
Providing this information helps maintain consistent records and reduces the need for manual updates later.
3.Improved Leave Tracking
With STP Phase 2, payroll systems can track employee leave balances more accurately throughout the year. This improves clarity around employee entitlements and ensures leave records remain current.
Leave information includes:
- Annual leave
- Personal leave
- Long service leave, where applicable
Accurate leave tracking helps businesses manage workforce planning while giving employees confidence in their leave balances.
4.Easier Corrections and Updates
If payroll information needs to be corrected, STP Phase 2 allows updates to be submitted through payroll software. This avoids the need for complex adjustments or manual corrections at a later date.
Making updates as changes occur helps keep payroll records consistent and reliable over time.
What Employers Report Under STP Phase 2
Each time payroll is processed, employers are required to report specific payroll details. This ensures payroll records stay up to date across the year.
| Reporting Area | What Is Included | Why It Matters |
|---|---|---|
| Income Categories | Ordinary earnings, overtime, bonuses, allowances, reimbursements, lump sums, parental leave | Provides clear insight into how employee pay is structured |
| Employment Details | Employment type, start and end dates, work location, payment basis | Keeps employee records accurate and up to date |
| Leave Information | Annual, personal, and long service leave balances | Ensures correct leave tracking and entitlements |
| Withheld Amounts | Amounts withheld and other deductions | Maintains accurate payroll calculations |
| Corrections & Updates | Adjustments submitted through payroll software | Reduces errors and avoids complex year-end fixes |
Benefits of STP Phase 2 for Businesses
Businesses that use STP Phase 2 experience several practical benefits that simplify payroll processes and improve record accuracy. These advantages help reduce administrative pressure while supporting better payroll management throughout the year.
Reduced Administrative Work
With payroll information reported automatically during each pay run, businesses no longer need to prepare separate reports at the end of the year. This ongoing reporting approach spreads the workload across the year and significantly reduces time spent on manual paperwork and compliance-related tasks.
Improved Accuracy
STP Phase 2 relies on payroll software to submit information directly, which minimises the risk of human error. Automated reporting ensures figures are consistent across records and reduces mistakes caused by duplicate data entry or manual calculations.
Increased Transparency
Employees can access up-to-date payment information whenever they need it through their online government account. This improved visibility helps employees better understand their earnings and reduces payroll-related queries for employers.
Better Leave Management
More detailed leave reporting allows businesses to track leave balances accurately as they accrue and are used. This ensures employee entitlements are calculated correctly and helps avoid disputes or confusion about leave balances.
Smoother Employee Transitions
By reporting employment start and end dates as part of payroll, STP Phase 2 keeps records accurate when employees join or leave the business. This simplifies onboarding and offboarding processes and helps ensure employee information remains current.
How ElitePlus Accounting Can Support You
ElitePlus Accounting works closely with Australian businesses to simplify payroll reporting. Support includes:
- Payroll system setup
- STP Phase 2 compliance reviews
- Ongoing payroll assistance
- Clear guidance for your business
The focus is on making payroll reporting straightforward and stress-free.
Final Thoughts
Single Touch Payroll has transformed payroll reporting by shifting from annual forms to real-time digital reporting. STP Phase 2 builds on this by improving accuracy, clarity, and consistency.
While the system may appear complex at first, the right setup and support make it a powerful tool for managing payroll efficiently. If you need help navigating STP or ensuring your reporting is accurate, the team at ElitePlus Accounting is ready to assist.
Frequently Asked Questions
Is Single Touch Payroll compulsory?
Yes, Single Touch Payroll is compulsory for most Australian businesses that employ staff. If you pay employees and use payroll software, you are generally required to report payroll information through STP. Some limited exemptions may apply in specific circumstances, but these are uncommon. Businesses unsure about their obligations should seek professional advice to confirm their requirements.
What does STP mean for employees?
For employees, STP provides greater visibility and clarity around their pay information. Instead of receiving a payment summary at the end of the year, employees can access their earnings, withheld amounts, and other payroll details throughout the year via their online government account. This allows employees to stay informed and reduces confusion about their income records.
What are the advantages of STP?
STP offers several advantages for businesses and employees alike. It reduces paperwork by spreading reporting across the year, improves accuracy through automated submissions, and keeps payroll records up to date in real time. For employees, it improves transparency and provides easier access to payment information when needed.
Will STP Phase 2 replace end-of-year reporting?
Yes, STP Phase 2 continues the move away from traditional end-of-year employee reporting. Because payroll information is submitted during each pay run, there is no need for separate employee summaries at year end. The information reported throughout the year is treated as final, provided it is accurate and complete.
Do all businesses need to use STP Phase 2?
Most businesses that are already using STP are required to meet STP Phase 2 reporting requirements. While some small employers may qualify for exemptions or alternative arrangements, the majority of businesses must comply. Ensuring payroll software is correctly set up for Phase 2 is essential to meeting reporting obligations.
