Single Touch Payroll explained without the jargon

Single Touch Payroll sounds like a compliance burden. In practice, once it is set up correctly, it is the part of payroll you stop thinking about.

What it is

Instead of telling the ATO about wages once a year, your software reports each pay run at the time you run it. Gross wages, PAYG withheld and superannuation liability go across automatically as part of processing the pay.

What that means for you

• Reporting happens every pay run, not annually
• Your staff see their year to date figures in their myGov account
• Payment summaries as a separate annual chore are gone
• The ATO sees your obligations in close to real time, which cuts both ways

The part people get wrong: finalisation

Reporting through the year is only half of it. At the end of the financial year the payroll has to be finalised, which is what turns your employees' figures into a completed income statement they can lodge from. Miss it and your staff cannot do their tax returns properly, and you will hear about it. Before finalising, the year needs reconciling: gross wages, withholding and super all agreeing between the payroll, the accounts and what was actually paid.

Where it goes wrong in small business

Almost always the same three places. Allowances coded to the wrong category, so they report incorrectly. Terminations and unused leave handled as ordinary pay. And a business that changed software mid year without bringing the payroll year to date across, which leaves two partial records and no complete one.

The visibility cuts both ways

Because the ATO now sees your payroll obligations as they arise, unpaid superannuation and unpaid withholding surface far faster than they used to. That is uncomfortable if you are behind, and genuinely useful if you are not, because problems get caught while they are still small.

General information only, current as a description of how STP works rather than advice about your obligations.