Payroll Problems – How Can Single Touch Payroll Save You Time & Money

Managing payroll is one of the most important responsibilities for any business—big or small. However, it’s also one of the most time-consuming and error-prone tasks. Between calculating wages, keeping up with changing tax obligations, ensuring superannuation accuracy, meeting Fair Work compliance, and lodging reports on time, employers often find themselves spending hours every pay cycle just trying to stay compliant.

In recent years, the Australian Taxation Office (ATO) introduced a major reform to streamline payroll reporting: Single Touch Payroll (STP). Its purpose is simple—make payroll easier, faster, more accurate, and more transparent for both employers and employees.

But what exactly is Single Touch Payroll? How does it solve common payroll problems? And most importantly—how can it save your business time and money?

This comprehensive article breaks it all down.

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What Is Single Touch Payroll (STP)?

Single Touch Payroll is an Australian government initiative requiring employers to report employees’ payroll information to the ATO each time they run payroll. This includes:

• Salaries and wages

• PAYG withholding

• Superannuation contributions

Rather than reporting this information at the end of the financial year, STP transmits it in real-time using compliant accounting or payroll software.

As of STP Phase 2, even more details are included, such as income types, disaggregation of gross payments, tax treatment codes, and child support obligations.

In essence, STP reduces the need for manual reporting and ensures accuracy with every pay run.

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Common Payroll Problems Faced by Small & Medium Businesses

Before understanding how STP helps, it’s important to recognise the most frequent payroll challenges employers face.

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1. Manual Data Entry Errors

Manual entry increases the risk of:

• Incorrect pay amounts

• Incorrect tax calculations

• Missed dates

• Wrong super contributions

These errors can lead to expensive penalties and employee dissatisfaction.

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2. Time-Consuming Payroll Processing

Without automated systems, businesses may spend hours or even days processing payroll every pay cycle. This includes:

• Gathering timesheets

• Calculating overtime

• Applying deductions

• Preparing reports

• Filing compliance forms

The time lost could be spent on growth-focused tasks.

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3. Staying Compliant with ATO and Fair Work

Payroll laws in Australia change frequently. Keeping up with:

• Tax tables

• Super guarantee rate changes

• Leave entitlement updates

• Reporting requirements

… can feel overwhelming, especially for small businesses with limited resources.

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4. End-of-Year Stress

Traditional payroll requires issuing:

• Payment summaries

• PAYG annual reports

• Reconciliation paperwork

Errors often go unnoticed until year-end, creating more work and stress.

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5. Poor Payroll Recordkeeping

Many businesses still rely on spreadsheets or outdated systems. Poor recordkeeping can cause:

• Lost employee documentation

• Incorrect tax returns

• Super compliance breaches

• ATO audit issues

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6. Cash Flow Problems from Incorrect Super or PAYG

Failing to pay super on time or underreporting PAYG withholding can result in harsh penalties.

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How Single Touch Payroll (STP) Solves Payroll Problems

STP was specifically designed to eliminate or reduce these common issues. Here’s how it saves time, reduces costs, and ensures accuracy.

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1. Automates Payroll Reporting

With STP-enabled software, every pay run automatically sends payroll data to the ATO.

This means:

• No more manually preparing monthly or quarterly payroll reports

• No need to lodge separate PAYG summaries

• Less paperwork

• Reduced risk of errors

Automation transforms payroll from an administrative headache into a simple, one-click process.

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2. Eliminates Year-End Payment Summaries

Since payroll information is reported every pay period:

• Employees access their income statements via myGov

• Employers no longer need to issue payment summaries

• No more lodging of annual PAYG reports

This saves significant time each financial year.

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3. Real-Time Accuracy for Super & PAYG

STP ensures the ATO receives:

• Real-time PAYG withholding updates

• Accurate superannuation accruals

This creates transparency and reduces the risk of underpayment or late payments. Super funds can also cross-check contributions, helping businesses avoid penalties.

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4. Reduces Payroll Costs

Automation and accuracy lead to cost savings:

• Fewer accounting hours

• Less administration time

• Fewer compliance penalties

• Reduced paperwork

For small businesses, STP can translate into thousands of dollars saved annually.

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5. Enhances Employee Transparency

Employees gain access to:

• Real-time income statements

• Accurate superannuation records

• Updated tax and pay information

This reduces employee payroll queries, saving the business even more time.

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6. Simplifies ATO Audits

Since the ATO receives payroll data in real time, audits become:

• Quicker

• Less intrusive

• Less stressful

Accurate data reduces the chance of being flagged for discrepancies.

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7. Supports Digital Transformation

STP encourages businesses to use modern accounting software, which often includes:

• Timesheet automation

• Award interpretation

• Leave management

• Rostering tools

This improves the entire payroll ecosystem—not just reporting.

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How STP Saves Businesses Time

Let’s break down the time-saving benefits clearly.

✔ Less manual data entry

✔ No more end-of-year payment summaries

✔ Faster payroll processing through automation

✔ Reduced employee payroll queries

✔ Automated compliance updates within software

✔ Faster ATO audits and fewer corrections needed

Businesses report saving 2–10 hours per pay cycle after switching to STP-compliant software.

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How STP Saves Businesses Money

STP can save your business money in several ways:

✔ Fewer accounting and bookkeeping fees

✔ Less time spent on administration

✔ Reduced penalties for PAYG and super errors

✔ Improved cash flow through accurate reporting

✔ Less time correcting mistakes

✔ Lower audit risks

For many businesses, these savings far outweigh the cost of payroll software.

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Who Needs to Use Single Touch Payroll?

All Australian employers—no matter the size—must use STP. This includes:

• Small businesses

• Micro businesses

• Sole traders with employees

• Directors receiving wages

• Any business paying staff, contractors (in some cases), or closely held payees

STP Phase 2 also expanded reporting requirements, making compliance essential.

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Steps to Get Started with Single Touch Payroll

1. Choose STP-Compliant Software

Options include:

• Xero

• MYOB

• QuickBooks

• Reckon

• Employment Hero

• Payroller

• Square

Look for a solution that fits your business size and payroll complexity.

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2. Set Up Employee Records Correctly

Ensure you have:

• TFNs

• Employment types

• Income types

• Super details

• Tax treatment codes

Accurate setup avoids reporting errors.

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3. Connect Payroll Software to the ATO

Most systems automate this by:

• Setting up Software ID (SSID)

• Authenticating via ATO Access Manager

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4. Run Your First STP Pay Run

Each time you run payroll, your data will automatically be sent to the ATO.

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5. Finalise End-of-Year Summary

Although STP removes payment summaries, employers must still finalise payroll annually—usually done with one click.

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FAQs on Single Touch Payroll

1. Do I still need to issue payment summaries?

No. STP replaces payment summaries and annual reporting requirements.

2. Will STP increase my payroll costs?

Typically, no. Most businesses find STP-enabled software reduces costs by lowering admin time and preventing penalties.

3. Can micro businesses use low-cost or free STP solutions?

Yes. Several providers offer free or low-cost options for businesses with 1–4 employees.

4. What is STP Phase 2?

STP Phase 2 expands reporting to include detailed breakdowns of employee income, tax treatment, and other obligations.

5. Is STP difficult to set up?

Most software platforms make setup simple, with step-by-step guidance.

6. Can I outsource STP payroll?

Yes. Many businesses choose to outsource payroll to ensure ongoing compliance and save time.

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Summary

Single Touch Payroll (STP) is designed to make payroll simpler, faster, and fully compliant for Australian businesses. By streamlining reporting, automating compliance, reducing errors, and providing real-time accuracy, STP removes many of the pain points associated with traditional payroll processing.

Businesses that adopt STP-compliant systems enjoy:

• Less paperwork

• Faster payroll processing

• Lower costs

• Better accuracy

• Reduced stress during tax time

STP is not just a government mandate—it’s a powerful tool that helps businesses modernize and operate more efficiently.

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Conclusion

Payroll is essential, but it doesn’t have to be difficult. The introduction of Single Touch Payroll has transformed the way Australian businesses manage and report employee information. By shifting from manual, time-consuming processes to automated real-time reporting, STP helps businesses save both time and money.

Whether you’re a small business owner, a growing enterprise, or a sole trader with a single employee, adopting STP not only helps you stay compliant—it streamlines your entire payroll system.

If you’re still doing payroll manually or struggling with outdated processes, now is the perfect time to embrace STP and experience the benefits of faster, smarter, and more accurate payroll management.