What Is Single Touch Payroll and How Does It Affect Small Businesses?

Single Touch Payroll For Small Businesses

Learn what Single Touch Payroll is and how it impacts your small business.

What is Single Touch Payroll?

Single Touch Payroll (STP) is a reporting initiative introduced by the Australian Government to simplify and improve the way employers report payroll information to the Australian Taxation Office (ATO).

Using ATO compliant STP software like seSQue Payroll, small businesses can report employees' income, pay-as-you-go (PAYG) withholding, superannuation contributions and other payroll information seamlessly on or before each pay day.

This eliminates the need to submit separate reports, such as employee payment summaries (a.k.a. group certificates), and ultimately benefits all the parties involved (employers, employees and the ATO) by streamlining the payroll reporting process.

What is small business?

There are many different definitions of small business in Australia, depending on regulatory body and purpose. Some define small business based on the aggregated turnover, others based on the number of employees and so on. For the purpose of this guide, we'll use the definition of the Australian Bureau of Statistics (ABS), which categorises businesses based on the number of employees as follows:

• Non-employing - 0 employees
• Micro Business - 1 to 4 employees
• Small Business - 5 to 19 employees
• Medium Business - 20 to 199 employees
• Large Business - 200+ employees

Different STP reporting options are available based on the number of payees and their type, e.g. arm's length employees, closely held payees.

Impact of STP reporting on small businesses

The Single Touch Payroll reporting requirement has prompted many small businesses to upgrade or replace their payroll systems in order to comply with the new rules.

For many small employers, however, the idea of implementing yet another process initially felt daunting. But once set up with STP enabled software, meeting payroll reporting obligations actually became faster and more straightforward. The shift from paper based reporting to an online system has saved time, reduced effort and helped many small businesses minimise reporting errors.

The ATO implemented Single Touch Payroll reporting in two phases.

In Phase 1, STP reporting became mandatory from 1 July 2018 for substantial employers (20 or more employees) and from 1 July 2019 for small employers (19 or fewer).

Phase 2 expanded the scope of payroll information reported and became mandatory on 1 July 2022.

Benefits of Single Touch Payroll for small businesses

STP reporting has simplified payroll for small businesses by saving time and labour, improving reporting accuracy and helping ensure compliance.

Here are some changes that have proven beneficial over time:

• Reporting payroll data with each pay run (e.g. weekly, monthly) ensures employee records remain current, enabling the ATO to provide employees with real-time access to accurate salary, tax and superannuation information via their myGov accounts.
• Finalising STP reporting at the end of the financial year is quick and straightforward. Businesses simply notify the ATO after the final pay run, making the process easier than in the past.
• Timely STP reporting enables the ATO to pre-fill the PAYG withholding section of the Business Activity Statement (BAS) and share employee payment data with other government agencies, helping reduce the reporting burden for small businesses and lowering the risk of penalties.
• Cloud-based STP software streamlines the entire payroll process — automating calculations for salary, superannuation, tax and leave entitlements; generating and distributing payslips; and more — all without the need for investing in costly hardware.

How to choose the best STP software for your business

Our experience shows that time and cost are the primary concerns small business owners have when it comes to STP reporting. The best STP software should therefore do more than just meet ATO requirements. It should save you time, reduce administrative overhead and fit your budget.

When choosing a payroll solution, consider:

• Ease of use – A simple, intuitive interface can save hours in setup, training and daily use.
• Pricing structure – Look for transparent, flexible pricing with no hidden fees or lock-in contracts.
• Automation features – Automating pay runs, superannuation calculations and ATO submissions can significantly reduce time spent on payroll.
• Compliance support – ATO compliant software with ongoing updates helps you stay aligned with changing requirements.
• Customer support – Australian based support can be invaluable when navigating local rules and resolving issues quickly.

Choosing the right Single Touch Payroll software isn't just about ticking compliance boxes. It's about finding a tool that works for your business, respects your time and keeps your costs under control.