STP membership is a voluntary program that lets sole traders and small business owners in Australia report their tax and superannuation to the ATO in real time, rather than waiting until the end of the financial year

STP stands for Single Touch Payroll. It is a system run by the Australian Taxation Office (ATO) that requires employers and businesses to send payroll information to the ATO each time they pay an employee or themselves. Instead of collecting payroll records all year and lodging a single annual return, STP members report as they go.

For sole traders — people who work for themselves — STP membership means you report your own income and superannuation contributions to the ATO in real time through compatible accounting software or payroll services. The ATO then has a live picture of your tax position throughout the year rather than only at tax time.

STP is not compulsory for all businesses. Sole traders and partnerships with no employees can choose whether to join. Employers with 20 or more employees have been required to use STP since 1 July 2018. Employers with fewer than 20 employees became required from 1 July 2019.

Key Takeaways

  • STP membership means reporting payroll information to the ATO each pay cycle using compatible software, not once a year at tax time.
  • Sole traders with no employees can choose to join STP or continue with traditional annual tax reporting.
  • Employers with employees are required to use STP if they have 20 or more staff (from 2018) or any number of staff (from 2019 onwards).
  • You need accounting software or a payroll service provider that is ATO-approved and STP-compatible to participate.
  • STP can reduce errors, give you real-time tax visibility, and simplify your end-of-year tax return process.

Who must use STP and who can choose

The ATO divides STP into two groups: those who must use it and those who can choose. If you are an employer, your obligation depends on your headcount. Employers with 20 or more employees have been required to report through STP since 1 July 2018. Employers with fewer than 20 employees became required from 1 July 2019. This means nearly all employers now report through STP.

If you are a sole trader with no employees, STP membership is voluntary. You can continue to lodge a traditional tax return once a year, or you can join STP and report your income and superannuation contributions in real time. Partnerships with no employees can also choose whether to join.

If you are unsure whether you are required to use STP, the ATO website has a tool that lets you check your business structure and size. Your accountant or tax adviser can also confirm your obligations.

How STP reporting works in practice

STP reporting happens through software. You do not send information directly to the ATO yourself. Instead, you use accounting software, payroll software, or a payroll service provider that is connected to the ATO's STP system. When you process a payment to an employee or yourself, the software sends that information to the ATO automatically.

For employers, this means each time you run payroll — weekly, fortnightly, or monthly — the software records the gross pay, tax withheld, superannuation contributions, and other details, then transmits them to the ATO. The ATO receives this information within days and updates your tax account in real time.

For sole traders who choose STP, the process is similar but simpler. You record your income and superannuation contributions through your accounting software, and the software sends this to the ATO on your behalf. You can do this weekly, monthly, or at whatever frequency suits your business.

The ATO then uses this real-time data to calculate your tax position as the year progresses. When you lodge your tax return at the end of the financial year, much of the information is already in the ATO's system, which can speed up processing and reduce the chance of errors or queries.

Software and service providers you need

You cannot use STP without compatible software or a service provider. The ATO maintains a list of approved STP-compatible products on its website. These include accounting software (such as MYOB, Xero, and others), payroll-only software, and outsourced payroll services.

If you are an employer, you need software that can handle payroll processing and STP reporting. Many accounting packages include payroll modules. If you prefer not to manage payroll yourself, you can use a payroll service provider — a business that processes payroll on your behalf and handles STP reporting.

If you are a sole trader considering STP, you need accounting software that supports STP for sole traders. Not all accounting packages offer this feature, so check the ATO's list or ask your software provider whether STP reporting is available for your business structure.

Most STP-compatible software charges a fee — either a monthly subscription, a per-employee charge, or a combination. Payroll service providers also charge fees, which vary based on the number of employees and the services included. These costs should be factored into your decision about whether to use STP or stick with traditional reporting.

Real-time tax visibility and year-round adjustments

One advantage of STP membership is that you can see your tax position throughout the year, not just at tax time. The ATO updates your account with each payroll report, so you know how much tax you have paid, how much you may owe, and whether you are on track for a refund.

This real-time visibility can help you plan. If you see that you are underpaying tax, you can adjust your withholding rate before the end of the year. If you are overpaying, you can request a variation to your withholding rate from the ATO. For employers, this means you can catch payroll errors or changes in circumstances quickly rather than discovering them months later.

STP also makes it easier to handle changes during the year. If an employee's circumstances change — they get a second job, claim more tax-free threshold, or change their superannuation contributions — you can update their details in the payroll software, and the ATO is notified in the next payroll report.

STP and your end-of-year tax return

When you are an STP member and the financial year ends on 30 June, your tax return process is different from traditional reporting. Much of your payroll information is already in the ATO's system because you have been reporting it all year. When you lodge your tax return, the ATO can pre-fill many fields with the data it has received through STP.

For employers, this means your annual reconciliation — the process of checking that all payroll information is correct and complete — is often simpler. You review what the ATO has on file, make any corrections if needed, and lodge your return. The ATO can also issue your PAYG payment summary to employees faster because the data is already verified.

For sole traders using STP, the same principle applies. Your income and superannuation information is already recorded, so your tax return can be completed more quickly. However, you still need to include other income, deductions, and adjustments that fall outside payroll reporting.

Costs and whether STP is worth it for sole traders

For employers, STP is not optional, so the cost is a necessary business expense. For sole traders, the decision is different. You need to weigh the cost of STP-compatible software or a service against the benefits of real-time reporting and a simpler tax return process.

If you are a sole trader with straightforward income and few deductions, traditional annual reporting may be cheaper and simpler. You can use basic accounting software or even a spreadsheet, and lodge your tax return once a year. The cost is lower, and the administrative burden is lighter.

If you have multiple income streams, complex superannuation arrangements, or want real-time visibility of your tax position, STP may be worth the cost. You also benefit if you prefer to spread the tax reporting workload throughout the year rather than doing it all at tax time.

Many accounting software providers offer both STP and non-STP versions, or they charge extra for STP reporting. Compare the costs and features of different providers to see what makes sense for your situation.

How to set up STP membership

If you are an employer required to use STP, you must have set it up by the important date that applied to your business size. If you have not yet done so, contact the ATO or your accountant when ready, as non-compliance can result in penalties.

If you are a sole trader considering STP, the first step is to choose compatible software or a service provider. Check the ATO's list of approved products, read reviews, and compare costs. Once you have chosen, you will set up an account with the software provider and link it to your ATO details.

The software provider handles the technical connection to the ATO's STP system. You do not need to register separately with the ATO for STP — the software does this on your behalf. Once everything is set up, you begin reporting through the software as you process payments or record income.

If you need help setting up STP, your accountant, tax adviser, or the software provider's support team can guide you through the process. The ATO also has resources and guides on its website explaining how STP works and how to get your free guide.

Frequently Asked Questions

Can I switch from STP back to traditional reporting if I am a sole trader?

Yes. If you are a sole trader and STP is not working for you, you can stop using it and return to traditional annual reporting. You will need to notify the ATO and your software provider. However, if you are an employer required to use STP, you cannot opt out — it is compulsory.

What happens if my STP software stops working or the provider goes out of business?

If your software provider closes or stops supporting STP, you need to switch to another approved provider quickly. The ATO expects continuous reporting, so a gap in STP submissions can trigger compliance issues. Contact the ATO if you are in this situation so they understand the reason for any delay.

Do I still need to keep payroll records if I use STP?

Yes. STP reporting does not replace your obligation to keep records. You must still keep payroll records, timesheets, and supporting documents for at least five years. STP is a reporting method, not a record-keeping method.

Does STP report superannuation contributions to my superannuation fund?

No. STP reports superannuation information to the ATO, but you still need to send superannuation contributions directly to your employees' superannuation funds. STP does not replace this obligation — it only reports what you have paid to the ATO for tax purposes.

What if I have employees in different states — does STP cover payroll tax reporting?

STP is a federal ATO system and reports to the ATO only. Payroll tax is a state-based tax, and you must report it separately to your state revenue office. STP does not cover payroll tax obligations.