STP Phase 2 is here, and its expanded data requirements have left many Australian employers unsure if they’re fully compliant. With the ATO’s deferral periods ending, now is the time to ensure your business is reporting correctly to avoid penalties.
This free compliance checker and guide will help you assess your readiness, understand common pitfalls, and choose the right software for a seamless setup.
How to Assess Your Current STP Readiness: A 10-Point Checklist
Use this quick checklist to score your business’s STP Phase 2 readiness. Give yourself 1 point for every “Yes” answer.
- Software Approved: Is your payroll software ATO-approved for STP Phase 2 (not just Phase 1)?
- Employee Classification: Have you updated employee records with the new, more detailed employment types (e.g., full-time, part-time, casual)?
- Income Disaggregation: Does your software correctly separate gross amounts into categories like overtime, bonuses, and paid leave?
- Allowance Reporting: Are you correctly reporting the specific type of each allowance (e.g., car, travel, clothing) as required?
- TFN Declaration: Have you collected and entered Tax File Numbers for all employees?
- Country Code: For any foreign resident employees, have you specified their country code?
- Payroll Alignment: Are your pay cycles accurately defined in the software (e.g., weekly, fortnightly)?
- Data Validation: Have you successfully submitted a test pay event with your new Phase 2 setup?
- Finalisation Process: Do you understand the process to finalise your STP data by July 14 each year?
- Backup Plan: Do you have a process to report payroll data if your primary internet connection fails?
Your Score:
- 0-5 Points: At High Risk. Your business is likely not compliant and may be subject to ATO penalties. Immediate action is required.
- 6-8 Points: Nearly There. You have a good foundation but have critical gaps in your STP process that need to be addressed.
- 9-10 Points: Compliant. Well done! Your business appears to be on top of its STP Phase 2 obligations. Keep up the good work.
STP Data Quality Requirements & Common Errors to Avoid
Phase 2’s devil is in the details. Incorrect data formatting is the leading cause of rejected submissions.
- Employee Name Mismatch: The employee’s name in your payroll must exactly match their name with the ATO (e.g., ‘Rob’ vs ‘Robert’). Mismatches cause validation failures.
- Pay Period Alignment: The financial year and pay period details must be accurate. A misaligned pay period can throw off all annual reporting.
- Misclassified Allowances: Labeling a “travel allowance” as a “general allowance” is a common error that will make your submission non-compliant.
- Worked Example: A Manufacturing Business with 25 Employees
Challenge: “A1 Manufacturing” uses a legacy payroll system. They employ 20 full-time staff, 3 part-time, and 2 casuals. They pay overtime, tool allowances, and have one foreign resident employee.
Compliance Assessment:
- Check 1: Their old software was only Phase 1 approved. ❌ FAIL
- Check 2: Their casuals were incorrectly classified as part-time. ❌ FAIL
- Check 3 & 4: Overtime and tool allowances were lumped into a single “allowances” figure. ❌ FAIL
- Check 5: The country code for their foreign employee was missing. ❌ FAIL
Action: A1 Manufacturing needed to upgrade to a Phase 2-approved platform (like Workstem). During setup, they:
- Corrected all employment types.
- Mapped their payroll categories to the new ATO income types.
- Added the missing country code.
- Ran a test pay event to validate the data before going live.
Result: They achieved a 10/10 on the checklist and now submit compliant STP reports automatically with each pay run.
Interactive STP Phase 2 Compliance Checker
Want a personalized report? Our interactive tool provides a detailed analysis based on your specific business setup.
How it works:
- Answer a few quick questions about your payroll and software.
- Get an instant readiness score and a summary of critical action items.
- For a detailed, personalised compliance report with step-by-step remediation advice.
How Workstem Helps Manage STP Obligations?
Ensure your business remains compliant effortlessly. Let Workstem’s automated payroll and integrated STP Phase 2 reporting handle the complexity for you. Explore Workstem’s STP Solution today and ensure peace of mind with every pay run.
Simplify award interpretation and payroll processing with Workstem, the all-in-one workforce management & payroll software designed for every industry.Workstem is an ATO-approved STP Phase 2 solution that simplifies compliance by automating the entire process:
- Built-in Validation: Workstem’s software is designed with the correct STP Phase 2 fields and categories, guiding you to enter data correctly and reducing errors.
- Seamless Integration: As an all-in-one platform, Workstem integrates time & attendance, payroll, and STP reporting. This eliminates manual data entry between systems, ensuring the data you report is accurate and consistent.
- Easy Submissions: Reporting is done with a single click at the end of each pay run, with immediate confirmation from the ATO.
- Simplified Finalisation: The year-end finalisation process is streamlined and can be completed in minutes.
Choose from our Standard or Advanced plan to suit your business needs, and stay Fair Work compliant with confidence.
FAQs About the Single Touch Payroll (STP)
Q1: What is Single Touch Payroll (STP) in simple terms?
A: Single Touch Payroll (STP) is a mandatory Australian government initiative that requires businesses to report their employees’ payroll information—such as salaries, wages, pay-as-you-go (PAYG) withholding, and superannuation—to the Australian Taxation Office (ATO) directly from their payroll software each time they run payroll. It’s “single touch” because the reporting happens with a single action at the same time as you pay your staff.
Q2: Who needs to report through STP?
A: Essentially, all Australian employers must report through STP. If you have even one employee, you are generally required to use STP.
Q3: What is the difference between STP Phase 1 and STP Phase 2?
A: STP Phase 2 expands the reporting requirements introduced in Phase 1. The key difference is the level of detail provided to the ATO.
- STP Phase 1 reported total amounts for key figures like gross earnings and tax withheld.
- STP Phase 2 requires a detailed, disaggregated breakdown of an employee’s income (e.g., separating salary, overtime, allowances, and leave payments).
Q4: What are my ongoing STP reporting obligations?
A: Your main ongoing obligations are:
- Report Each Pay Event: Submit the required data to the ATO on or before every pay day.
- Year-End Finalisation: Finalise your data by 14 July each year. This declares the information for the financial year is complete and correct. This replaces the need to provide payment summaries to your employees.
- Keep Records Accurate: Ensure employee details in your payroll software are always up-to-date (e.g., tax declarations, super fund choice).
Q5: I missed the STP Phase 2 migration deadline. What should I do?
A: You should take action immediately:
- Contact your software provider to start the transition process.
- Lodge a voluntary disclosure with the ATO to explain the delay. The ATO generally looks favorably upon businesses that come forward voluntarily and may provide you with a compliance plan or extra time to transition.
- Ensure you are using an ATO-approved STP Phase 2 solution, like Workstem, to become compliant.
Q6: How does STP help with my employees’ Superannuation?
A: While STP itself does not pay your super, it reports the liability for superannuation to the ATO each payday. This allows the ATO to better monitor and ensure that employers are meeting their super guarantee obligations on time. You still need to pay your super contributions to your employees’ funds by the quarterly due dates.
Q7: Does STP change when I have to pay my tax and super?
A: No. STP is a reporting system, not a payment system. The due dates for paying the PAYG withholding tax you report to the ATO and your super guarantee contributions to funds remain unchanged.
Q8: What happens if I make a mistake in my STP report?
A: Mistakes can be fixed. If you discover an error in a past submission, you can make a STP amendment through your payroll software. You simply correct the information in your system and submit a revised update to the ATO. It’s important to correct errors as soon as you find
Q9: Where can I find official information from the ATO?
A9: The best source of truth is always the official ATO website. You can find comprehensive guides, news, and resources on their Single Touch Payroll for employers page.
Book a free demo with our payroll experts and experience how Workstem can streamline your payroll and workforce operations.
Read More：
STP Phase 2 Australia: Post-Migration Compliance Guide & Requirements
Single Touch Payroll 2025: Everything Australian Employers Need to Know
Guide to Single Touch Payroll for Closely Held Payees
