Single Touch Payroll (STP) in 2026: Phase 2, Payday Super, Exemptions and Finalisation

If you pay even one employee in Australia, your payroll software has to talk to the ATO every payday. That's Single Touch Payroll (STP). This guide is for small business owners, bookkeepers and directors who run payroll. It explains who has to report and when, what STP Phase 2 added, the concessions for micro employers and family members, exemptions, the 14 July finalisation, how to correct mistakes, and the biggest change since Phase 2: from 1 July 2026, Payday Super requires every pay event to carry each employee's qualifying earnings and super liability. Worked examples use Australian dollars.

Quick answer

Single Touch Payroll is mandatory reporting of each employee's pay, PAYG withholding and super to the ATO from STP-enabled software, on or before every payday. Phase 2 (from 1 January 2022) added a breakdown of gross pay, employment basis, tax treatment and termination details. Employers finalise each year's data by 14 July. From 1 July 2026 pay events must also report year-to-date qualifying earnings and super liability; from 1 July 2027 the ATO will reject reports without them.

• Applies to every employer, including those with one employee

• Closely held payees (family, directors) can be reported quarterly by employers with 19 or fewer payees

• Exempt: withholding payer number holders until 30 June 2033, plus approved exemptions

• Correct errors within 14 days or by the next pay event

• Super must now reach the fund within 7 business days of payday

What STP is and who must report

Before STP, employers ran payroll, withheld tax, and once a year printed payment summaries for staff and lodged an annual report with the ATO. STP replaced that annual cycle with reporting each payday. Your payroll software sends a pay event to the ATO with each employee's year-to-date gross pay, PAYG withholding and super information, and the ATO builds the employee's income statement in myGov from it.

The ATO says STP started on 1 July 2018 for employers with 20 or more employees and on 1 July 2019 for employers with 19 or fewer. It is now mandatory for all employers unless the ATO has granted an exemption or the business uses a withholding payer number. There's no headcount threshold: a café with one part-time barista reports just as a hospital does.

STP covers payments that are subject to PAYG withholding and in scope for reporting — salary and wages, directors' fees, paid leave, allowances, lump sums on termination, employment termination payments and some others. It doesn't cover payments to genuine contractors paid by invoice (unless they've signed a voluntary agreement and you choose to include them), dividends, or trust distributions. The obligation follows the type of payment, not the person: the same director can receive a directors' fee that must be reported and a dividend that isn't.

STP sits alongside your other payroll duties rather than replacing them. You still withhold tax using the ATO's tax tables (see our PAYG withholding guide), report total wages and withholding at W1 and W2 on your BAS, pay the withholding by the BAS due date, and pay super. STP data is matched against those amounts, so differences between STP totals and BAS figures are one of the first things the ATO checks.

STP numbers for 2026

Payday

Pay event due

on or before

14 July

Finalisation

arm's-length employees

30 September

Closely held payees

small employers

7 business days

Super must reach the fund

Payday Super

When to report: on or before each payday

The core rule is simple: report a pay event on or before the pay day. The ATO defines the pay day as the payment date in the electronic payment instruction you send to your bank or, if you don't set a date, the date you intend the money to reach the employee's account. Most payroll software lodges the pay event automatically when you finalise a pay run.

A few variations:

• Out-of-cycle payments. If you pay a one-off bonus or a correction between pay runs, you can lodge a separate pay event on or before that payment, or include it in your next regular pay event if your software supports that. If the next regular pay run falls in the next financial year, the payment must be reported by 30 June of the year it was made.
• Multiple pay frequencies. Weekly wages staff and monthly salaried staff can be reported in separate pay events on their own pay days.
• Payroll through an agent. A registered tax or BAS agent can lodge for you; a payroll bureau that isn't registered can run your payroll but you remain responsible, and the ATO's penalty safe harbour for agents doesn't extend to it.

What STP Phase 2 added

Phase 2, announced in the 2019–20 Budget and mandatory from 1 January 2022 (with software-provider deferrals during the transition), didn't change how or when you lodge. It changed what each report contains, so that Services Australia can use the data for Centrelink and Family Tax Benefit customers without asking employers for separate forms.

What a Phase 2 pay event contains

Area	What you report	Why it matters
Disaggregation of gross	Gross split into ordinary pay, overtime, bonuses and commissions, allowances by type, paid leave by type, directors' fees, salary sacrifice, lump sum W and back pay	Social security treats these components differently
Employment conditions	Employment basis (full-time, part-time, casual, labour hire, voluntary agreement, death beneficiary, non-employee)	Replaces separate forms to Services Australia
Tax treatment code	A six-character code from the TFN declaration (tax-free threshold, study and training loans, Medicare levy variations)	Lets the ATO warn staff about withholding that will leave them with a bill
Income type	Salary and wages, closely held payee, working holiday maker, foreign employment, inbound assignee and others	Pre-fills the right label in the employee's return
Cessation	Date and reason an employee leaves	Replaces most separation certificates
IDs	Previous BMS ID and payroll ID when you change software	Prevents duplicate income statements

Disaggregation of gross

What you report

Gross split into ordinary pay, overtime, bonuses and commissions, allowances by type, paid leave by type, directors' fees, salary sacrifice, lump sum W and back pay

Why it matters

Social security treats these components differently

Employment conditions

What you report

Employment basis (full-time, part-time, casual, labour hire, voluntary agreement, death beneficiary, non-employee)

Why it matters

Replaces separate forms to Services Australia

Tax treatment code

What you report

A six-character code from the TFN declaration (tax-free threshold, study and training loans, Medicare levy variations)

Why it matters

Lets the ATO warn staff about withholding that will leave them with a bill

Income type

What you report

Salary and wages, closely held payee, working holiday maker, foreign employment, inbound assignee and others

Why it matters

Pre-fills the right label in the employee's return

Cessation

What you report

Date and reason an employee leaves

Why it matters

Replaces most separation certificates

IDs

What you report

Previous BMS ID and payroll ID when you change software

Why it matters

Prevents duplicate income statements

Two practical consequences. First, employees no longer send their TFN declaration to the ATO — they give it to you, you keep it, and its details flow through STP. Second, choosing the right pay category in your software is now part of compliance. Mapping a car allowance as ordinary pay, or a back payment as a bonus, puts the wrong figure in front of Services Australia and the ATO even if the total is right.

Payday Super: the new STP fields from 1 July 2026

Payday Super started on 1 July 2026. Employers must now pay super guarantee for each payday so that it reaches the employee's fund within 7 business days (or 20 business days for a new employee or a new fund), and the earnings base changed from ordinary time earnings (OTE) to qualifying earnings (QE). QE is wider than OTE: it includes all commissions, amounts sacrificed to super that would otherwise have been QE, and payments to workers treated as employees under the expanded definition. Our superannuation guarantee guide covers the payment rules and the super guarantee charge.

STP is how the ATO checks this. From 1 July 2026, every pay event must include, for each employee:

• year-to-date qualifying earnings, and
• year-to-date super liability — the minimum super guarantee payable on those earnings, plus any extra amounts you've chosen to include.

Super funds report the contributions they receive, and the ATO compares the two. A gap shows up within days rather than at the end of a quarter, which is why the old SG statement has gone: the ATO now uses STP and fund data to raise super guarantee charge assessments.

STP milestones to 2026 and beyond

1 July 2018

STP starts for employers with 20 or more employees

1 July 2019

STP starts for employers with 19 or fewer employees

1 January 2022

STP Phase 2 reporting begins

1 July 2026

Payday Super: report YTD qualifying earnings and super liability in every pay event

14 July 2027

Finalisation for 2026–27 (first full Payday Super year)

1 July 2027

ATO rejects STP reports missing QE and super liability

The ATO is allowing a transition year. Until 30 June 2027 it still accepts the older OTE and super liability fields in pay events, and you don't need a deferral if your software starts reporting QE at some point during 2026–27. Once you switch to QE, OTE reporting is no longer accepted. If your software isn't ready, the ATO's advice is to keep paying super on qualifying earnings each payday, keep accurate records — especially of extra amounts included in the super liability — and report the year-to-date figures as soon as the update arrives. Check that your pay categories are mapped to QE correctly; a commission category still flagged as "not OTE" is the most common gap.

Worked examples in A$

These use the 2026–27 rules. Figures are rounded and simplified.

1. A fortnightly pay run. Sam runs a Geelong bakery with three staff paid fortnightly on Thursday. In the pay run for 8 October 2026, apprentice Lily earns A$1,400 ordinary pay and A$180 overtime. The software withholds A$196 under the fortnightly tax table and calculates super guarantee at 12% of her qualifying earnings. Overtime isn't QE for Lily because it's for hours outside her ordinary hours and isn't commission, so her QE for the period is A$1,400 and her super liability A$168. The pay event lodged on or before Thursday shows her year-to-date figures since 1 July — not just this fortnight — split into ordinary pay and overtime, her tax withheld, her YTD QE and YTD super liability. Sam then has 7 business days to get the A$168 into her fund.

2. A salaried manager with commission. A Perth real estate office pays a sales manager A$7,000 a month plus commissions. In October she earns A$3,000 commission. Under OTE, some commissions fell outside the base; under QE, all commission counts. Her October QE is A$10,000 and her super liability A$1,200. The pay event must report the A$3,000 under the commission category and include it in YTD QE.

3. A director paid a fee. A two-director Adelaide company pays each director a A$4,000 quarterly directors' fee and nothing else. The company has fewer than 19 or fewer payees, so it can report the fees each time it pays them or quarterly. When a director draws money during the quarter and it's recorded as a loan at once, the draw isn't reported through STP — only the fee that later clears the loan is. Dividends aren't reported through STP at all. See our guide to how to pay yourself as a company director.

Running a compliant STP pay event

1. 1

   Check employee set-up

   TFN declaration on file, tax treatment, employment basis, super fund (choice or stapled fund) and pay categories mapped to Phase 2 and QE.

2. 2

   Process the pay run

   The software calculates gross, PAYG withholding and the super liability on qualifying earnings.

3. 3

   Lodge the pay event

   On or before the pay day. Check the ATO's response message for errors and fix rejected records straight away.

4. 4

   Pay staff and super

   Wages on the pay day; super so it reaches the fund within 7 business days.

5. 5

   Reconcile

   Each quarter, compare STP totals with W1 and W2 on your BAS before you lodge.

Concessions for micro employers and closely held payees

Micro employers. The ATO defines a micro employer as one with 1–4 employees. When STP started for small employers, micro employers could ask a registered agent to report for them quarterly. Since 1 July 2021, that quarterly concession is only granted in exceptional circumstances — such as seasonal workforces that go above four staff for less than three months of the year, or no reliable internet. If approved, it lasts 2 years, the agent reports through STP-enabled software (the agent portal can't lodge pay events), and each quarterly report is due on the same day as the activity statement. Every other micro employer reports each payday. The ATO has encouraged developers to offer simple, low-cost STP products for micro employers; check the ATO's current list before buying full payroll software you don't need.

Closely held payees. A closely held payee is someone directly related to the business that pays them — family members in a family business, directors or shareholders of a company, beneficiaries of a trust. Employers with 19 or fewer payees can report closely held payees in one of three ways:

1. actual payments on or before each payday, like any other employee;
2. actual payments quarterly, by the activity statement due date; or
3. a reasonable estimate quarterly, then true up at finalisation.

Arm's-length employees of the same business must still be reported each payday. Employers with 20 or more payees can't use these options. The finalisation for closely held payees is due by 30 September, rather than 14 July.

Exemptions and deferrals

Some employers don't report through STP at all:

• Withholding payer number (WPN) holders — payers without an ABN, such as a household employing a nanny — are exempt until 30 June 2033 and don't need to apply.
• Approved exemptions. Small employers (19 or fewer payees) with low digital capability or unreliable internet, employers in an area with no internet service, and employers hit by exceptional or unforeseen circumstances can apply for an exemption for one or more financial years. Applications are made in Online services for business (Employees → STP deferrals and exemptions), by phone, or through your registered agent.

An exemption covers the reporting, not the underlying obligations. Exempt employers still withhold, pay super, give each employee a payment summary by 14 July and lodge a payment summary annual report — see our PAYG payment summary guide.

A deferral is different: it gives more time to start reporting, or to lodge a particular report, when exceptional circumstances apply. If you've stopped paying employees for the rest of the year, lodge a No requirement to report notice so the ATO doesn't chase missing reports.

End-of-year finalisation

At the end of the financial year you make a finalisation declaration for each employee you paid. It tells the ATO the year-to-date figures are complete, and the employee's income statement in myGov changes to Tax ready so they can lodge. Most software lets you finalise in a final pay event or a separate update event.

Before you finalise, reconcile the year: STP totals against your payroll reports, your four BAS W1 and W2 figures, and your super payments. Also report reportable fringe benefits amounts and reportable employer super contributions, usually in the finalisation event. Once finalised, you don't give those employees payment summaries and you don't lodge an annual report for the same amounts. For 2026–27, the year-end check should also cover YTD qualifying earnings and super liability, because the ATO will compare them with fund data.

Correcting mistakes and penalties

STP reports year-to-date figures, so most errors fix themselves in the next pay event: correct the YTD amount and the new figure overwrites the old one. The ATO asks that you correct errors within 14 days of finding them, or by the next regular pay event if your pay cycle is longer (for example, monthly). After the year ends, use an update event for corrections that don't involve a payment; you can amend finalised data for up to 5 years after the end of the financial year. Never "reverse" an error by lodging a negative pay event — just send the right YTD figure.

If you change software mid-year, either carry the YTD balances into the new product and zero out the old one, or report the previous BMS ID and payroll ID so the employee doesn't end up with two income statements.

Fixing an STP error

Step 1

Spot the error

Step 2

Correct the YTD figure

within 14 days or next pay event

Step 3

After 30 June?

lodge an update event

Step 4

Finalised data

amend for up to 5 years

On penalties, the ATO has said that genuine mistakes in the first year of Phase 2 wouldn't be penalised, and its general approach to STP has been educational. That is tightening. In March 2026 it released draft practice statement PS LA 2026/D2, which sets out how staff will apply three types of penalty to STP reporting: failure to lodge on time, lodging in an unapproved form, and false or misleading statements — where each incorrect statement about each employee can be a separate penalty. The draft also covers reasonable care, the safe harbour for registered agents, and remission. Comments closed on 24 April 2026; check the ATO's legal database for the final version. Combined with Payday Super's rejection of non-compliant reports from 1 July 2027, it's worth getting the set-up right now.

Common mistakes

• Lodging after payday. The due date is the pay day, not the BAS date. Late pay events are the easiest breach for the ATO to see.
• Wrong pay categories. Allowances, back pay and leave mapped as ordinary pay make Phase 2 and QE figures wrong even when gross is right.
• Ignoring the ATO's response. A rejected pay event hasn't been lodged. Check every submission status.
• Reporting director drawings as wages, or not reporting fees. Record loans promptly; report directors' fees.
• STP and BAS not matching. Reconcile W1 and W2 quarterly, not just at 30 June.
• Not updating for Payday Super. Software still reporting OTE only will be rejected from 1 July 2027.

Official links

• ATO — Single Touch PayrollStart here: reporting, concessions, exemptions
• ATO — STP Phase 2 employer reporting guidelinesRules of reporting, finalisation and corrections
• ATO — STP reporting under Payday SuperQualifying earnings and super liability fields
• ATO — Closely held payeesFamily members and directors
• ATO — STP deferralsMore time and exemptions

Next steps

Open your payroll software and check three things before the next pay run: that it reports qualifying earnings and super liability, that every pay category is mapped correctly, and that your super is reaching funds within 7 business days. Then diarise 14 July for finalisation. Our PAYG withholding guide covers how much tax to take out, the superannuation guarantee guide covers Payday Super payments, and the free salary slip generator helps you produce payslips that match what you report.

This is general information, not legal or tax advice — confirm on the official source or with a professional.

Frequently asked questions

What is Single Touch Payroll?

Single Touch Payroll is the ATO system that makes employers send each employee's pay, tax withheld and super information to the ATO from their payroll software every time they pay their staff. It started on 1 July 2018 for employers with 20 or more employees and 1 July 2019 for smaller employers, and it replaced payment summaries with income statements in myGov.

Is STP mandatory for small businesses with one employee?

Yes. Every employer must report through STP unless it holds an exemption. Micro employers with 1–4 employees can use a low-cost STP product, or — only in exceptional circumstances — apply through a registered agent to report quarterly for 2 years. Employers using a withholding payer number instead of an ABN are exempt until 30 June 2033.

When is the STP finalisation due?

For most employees, by 14 July after the end of the financial year. Small employers with closely held payees, such as family members or directors, have until 30 September for those payees. Finalisation tells the ATO your data is complete and turns each employee's income statement to 'tax ready'.

What changed in STP Phase 2?

From 1 January 2022, Phase 2 required employers to break gross pay into components such as overtime, allowances, bonuses, paid leave and salary sacrifice, and to report each employee's employment basis, tax treatment, income type and the date and reason they leave. The lodgment method and due dates didn't change. Employees no longer need to send TFN declarations to the ATO.

How does Payday Super change STP?

From 1 July 2026, employers must report each employee's year-to-date qualifying earnings and super guarantee liability in every STP pay event. The ATO will still accept the older ordinary time earnings fields until 30 June 2027, but from 1 July 2027 it will reject STP reports that leave the new amounts out, and penalties may apply.

How do I fix a mistake in STP?

Correct it within 14 days of finding it, or by your next regular pay event if your pay cycle is longer. Year-to-date figures overwrite earlier ones, so most errors are fixed in the next pay event; after year-end, lodge an update event. You can amend finalised data for up to 5 years after the end of the year.

Sources & verification

Figures on this page were checked against the sources below when it was last reviewed on 11 October 2026. Each rate and limit is stored once with its own official source and review date, and official update channels are monitored daily so changes are picked up. How we verify

1. 1.STP Phase 2 employer reporting guidelines — Rules of reporting through STP — Australian Taxation Office · accessed 11 October 2026
2. 2.Expanding Single Touch Payroll (Phase 2) — Australian Taxation Office · accessed 11 October 2026
3. 3.STP reporting for closely held payees — Australian Taxation Office · accessed 11 October 2026
4. 4.STP concessional reporting — micro employers — Australian Taxation Office · accessed 11 October 2026
5. 5.STP deferrals — Australian Taxation Office · accessed 11 October 2026
6. 6.Single Touch Payroll reporting under Payday Super — Australian Taxation Office · accessed 11 October 2026
7. 7.Payday Super: frequently asked questions — Clayton Utz · accessed 11 October 2026
8. 8.ATO issues new guidance on penalties for non-compliance with STP — Accountants Daily · accessed 11 October 2026