Find out who must report through Single Touch Payroll (STP), which businesses can apply for a deferral and the features of seven software products you can choose from.
Australian small businesses have been required to report through Single Touch Payroll (STP) since 30 September 2019, but recent reports indicate that not all businesses have started doing so.
So it's time to make sure you understand what this new reporting requirement means for your business, if you haven’t already done so.
The Australian Taxation Office (ATO) describes STP as "a new way of reporting tax and superannuation information to us.”
“You will report your employees' payroll information, such as salaries and wages, pay as you go (PAYG) withholding and super information to us each time you pay them."
That’s arguably one of the biggest accounting-related changes for businesses since the introduction of the Goods and Services Tax (GST) in 2000. And it’s likely to encourage some employers that weren’t using payroll software to start doing so.
But you shouldn’t see STP as a burden. Automatic reporting isn't difficult to set up and shouldn’t make payroll a more difficult or time-consuming task. In fact, it shouldn’t require anything more than an extra mouse click.
STP should also save you time at the end of the financial year, because you won’t have to provide additional reports to the ATO or payment summaries to your employees. End-of-year processing just involves making a finalisation declaration.
Also keep in mind that the ATO has stated that during the first year of STP reporting small businesses won’t be penalised for missing STP reports, submitting them late or making mistakes on them.
This article is intended to give you a summary of some of the issues to consider – and a guide to the key features of seven low-cost, standalone STP payroll software solutions for micro businesses.
Keep in mind that the STP rules aren’t as simple as some sources suggest and this article doesn’t cover every aspect of STP reporting – so we recommend you seek advice from your tax professional or the ATO before making any decisions about STP, especially if your situation isn't clear cut.
Which businesses must report through STP?
If your business has 20 or more employees, it should have been reporting through STP since July 2018. Keep in mind that in this context, “employees” can include:
- full-time employees
- part-time employees
- casual employees
- employees based overseas
- any employee absent or on paid or unpaid leave.
So, if you have 40 employees each working half-time that counts as 40 employees, not 20 full-time-equivalent employees.
These people do not count as employees in this context:
- employees who have ceased working for you
- independent contractors
- staff provided by a third-party labour hire organisation
- office holders
- religious practitioners
- 'closely held payees' such as family members of a family business, directors or shareholders of a company and beneficiaries of a trust.
If your business has 19 or fewer employees, it should have started reporting through STP by 30 September 2019 – unless you obtained a deferral from the ATO.
Which small businesses can defer STP reporting?
Any small employer can request a deferral if it needs more time to start STP reporting, but you have to justify why you should be granted one. According to an ATO spokesperson "The degree of substantiation differs depending on what they state the reason is and how long they request the deferral to be."
The ATO will consider deferrals if you are using customised payroll software and need time to configure and test it, for example. You can also apply for a deferral if you’re in an area with intermittent or no internet connection.
If your business is a ‘micro employer' (it has one to four employees) and has a non-computerised payroll system – which an ATO spokesperson told us "could include running your payroll manually and keeping records on a spreadsheet or paper” – then you may have also been eligible to lodge quarterly through your registered tax or BAS agent until 30 June 2021. But your agent had to apply on your behalf by 30 September 2019.
Micro employers in the agriculture, forestry and fishing industries, can apply to report quarterly until 30 June 2021, though they must report through STP.
What about sole traders and business partners?
Not all sole traders have to report through STP, because they may not be counted as employees of their own business. An ATO spokesperson told us "sole traders are not employees of their own business" if they are the sole director and sole shareholder of the company through which they conduct the business. In most cases, these arrangements are classified as personal services income. So "unless the sole trader pays other employees, a sole trader working in their own business is not in the scope of STP."
This also means that if you are a sole trader and have four employees, you can take advantage of the concession for micro employers mentioned earlier, because you aren't included in the headcount.
If your business has two or more closely held payees and no other employees, STP reporting comes into effect from 1 July 2020, with the option to report quarterly rather than at the time of each payment.
Business partnerships that have employees are treated the same way as any other employer in this context. However, the partners are excluded from the employee headcount. That’s because “partners in a firm/partnership are not employees and payments to partners are considered distributions of partnership profits and not salary and wages, thus they are not subject to PAYG Withholding". Consequently such payments are not subject to STP reporting.
STP reporting products
Once you are required to start STP reporting, you have two main options:
- engage a payroll service that provides STP reporting, such as one offered by your tax or BAS agent
- use payroll software that incorporates STP reporting. This includes accounting software with this feature.
If you are going to do your own reporting, you must do it electronically.
Most small business accounting systems now incorporate STP reporting, but if you're using an old version of a desktop product you may need to install an update.
The advantage of payroll software that's part of a broader accounting package is that once you set it up, you won’t need to spend extra effort transferring payroll data into your accounts. Examples of STP-enabled accounting products include:
- BAS Off
- MYOB AccountRight
- MYOB Essentials
- Reckon One Pro/Premium
- Saasu Medium
- Sage Business Cloud Accounting
However, if your business is so simple that you don't need an accounting program, you can use standalone payroll software that handles STP.
You might also take this approach if you want to be hands-on with payroll, while using a bookkeeper or accountant to handle other accounting functions. In that case, we strongly advise you to discuss this with a professional, as you may need to pay significantly higher fees if you choose a program that doesn't fit in with their way of working.
You don’t have to use payroll software to do STP reporting though. There are products that just take care of lodgement – you enter the data manually or export it from your spreadsheet, and the software sends it to the ATO in the required format.
The ATO lists free and cheap STP-enabled payroll and lodgement-only products and the Australian Government also lists all commercially available STP payroll products, including accounting and payroll software. These include:
- Cashflow Manager Wages 1-4: Windows software priced at $9.90 per month (charged annually) for up to four employees
- CloudPayroll: Cloud product, prices starting at $10 a month for up to four employees
- Easy Payslip: Cloud product (Android and iOS apps available), prices starting at $8.80 a month for up to four employees
- KeyPay Standard: Cloud product, prices starting at $4 per month per employee
- Microkeeper: Cloud product, prices starting at $9 a month for up to four employees
- Myaccountant Payroll: Cloud product, prices starting at $2 per employee per month
- MYOB Essentials Payroll: Cloud product, prices starting at $10 a month for up to four employees
- Payroller: Free cloud product (Android and iOS apps available) with unlimited payrolls and employees
- Reckon Single Touch Payroll App: Free Android/iOS product. It only handles STP reporting – you must enter the details of your pay run. Could be useful if you do payroll on paper or spreadsheets
- Single Touch Lite: Cloud product priced at $7.50 a month for up to 30 employee STP transmissions, then 25 cents per employee per event. Only handles STP reporting - you must to enter the details of your pay run or upload a CSV file containing the information. Could be useful if you do payroll on paper on in spreadsheets
- SmartPayroll STP Basic: Cloud product priced at $10 a month for up to four employees
- Xero Payroll Only: Cloud product priced at $10 a month for up to four employees.
Click to the next page to see the key features of 7 STP payroll solutions for micro businesses.
7 standalone STP payroll solutions for micro businesses
Look at the key features of these low-cost and free payroll products for reporting through the Single Touch Payroll (STP) system.
Many businesses must now report to the ATO through Single Touch Payroll (STP), and to do that they’ll need an electronic STP reporting product. But there’s an overwhelming number of STP-capable products to choose from.
As we mentioned on the previous page of this article, if your business is so simple that you don't need an STP-capable accounting program, you have a couple of options. You can use a free or low-cost solution that just lodges STP information, or one that also allows you to manage your payroll. The ATO provides a list of both types of low-cost or no-cost STP solutions.
To make your choice easier, we’ve looked at some of the key features of seven standalone STP payroll products, which are all low-cost or free. Our aim is to give you a better understanding of the different features available, not to provide an exhaustive review of each product.
This a subset of Cashflow Wages Manager and as its title says, you can use it to pay up to four employees. It costs $9.90 per month and you must pay for at least 12 months, though a free trial is available.
This software doesn’t have an employee self-service function, which some users might regard as a disadvantage. Another potential disadvantage of this product is that it’s the only one in this list that runs on Windows, rather than in the cloud or as a mobile app.
- pay calculation and payslip generation
- STP lodgement
- leave entitlement processing
- SuperStream-compliant reporting for manual entry or uploading to your chosen clearing house.
Once you’ve fully set up STP, routine processing appears straightforward. You can lodge a new pay run, update a single record in a previous lodgement (which you might want to do if an error was made in an individual's pay) or completely replace a previous lodgement.
This is another headcount-limited version of a full payroll system. It costs $10 a month for up to four employees, and there’s a free trial available.
- employee record keeping, including leave
- extensive reporting
- automated pay runs
- support for a wide range of deductions, including loan repayments and novated lease payments
- STP lodgement.
The actual payment process can be done manually or by exporting an ABA file to make it largely automatic. Two-factor authentication is optional, using Google Authenticator, Microsoft Authenticator or certain other apps.
Custom fields are also available to help you manage and report on employee data. For example, you could use these to track training undertaken and licence expiry dates.
There is also an employee ‘kiosk’, which allows employees to make timesheet entries, submit leave requests, and examine their payslips, tax summaries and other information.
CloudPayroll integrates with MoneyWorks, MYOB, QuickBooks, Xero and other accounting systems, saving you the effort of manually transcribing data. It also works with a range of time and attendance, rostering, human resources, occupational health and safety, and business management software.
If your business grows beyond four employees, the full CloudPayroll system costs $2.20 per person plus a $7.75 pay run fee per week. Unusually, the company also offers a fully outsourced payroll service for businesses that would rather not do the work in-house.
Easy Payslip boasts that users can set up its software in less than 10 minutes. They also offer a 30-day free trial, so there are hardly any barriers to seeing whether it would work for you.
If you decide to buy it, you’ll need to pay $8.80 a month ($8.99 via in-app payments) for up to four employees. The price increases to $12.95 for up to six employees and $19.95 for up to 10 employees.
- creation and emailing of payslips (with weekly, monthly or fortnightly pay runs)
- tracking of entitlements, such as annual and sick leave, and superannuation
- handling of STP lodgements
- a range of reports
- Android and iOS apps.
However, there is no indication that Easy Payslip can generate an ABA file, which can be uploaded to your bank to trigger payments. Nor is there any indication that it interfaces with superannuation clearing houses. So presumably the actual transactions are performed manually, working from reports generated by the software. Unlike some of the other products described here, you would also need to transcribe data into your accounting system.
There's no sign of an employee portal or employee app in Easy Payslip either, like some of the other applications in this list. So, you would need to keep your employees' details up to date. You can send a Tax File Number and superannuation choice forms to an employee from within the app though.
This cloud application is fairly well known in small business circles, because a 10-employee licence is included with Intuit QuickBooks subscriptions. So we’ve included it in this list, even though the price of $4 per month, per employee takes it above the ATO's $10 threshold for low-cost products. There’s also a free 30-day trial.
The product includes the usual payroll functions. It processes STP lodgements automatically after each pay run and processes superannuation quarterly.
The employee portal allows employees to fill in timesheets, leave requests and maintain personal details. They can access it via the web or by using the WorkZone app for Android or iOS, although the app doesn’t support all the portal functions.
KeyPay integrates with the QuickBooks, Saasu and Xero accounting systems, as well as several rostering, time and attendance, human resources and point-of-sale applications – in addition to other systems.
If you pay a little more, KeyPay Plus ($6 per employee per month) knows about Modern Awards, and allows you to create your own pay rules to help automate the payroll process. It also includes a rostering function, which is unusual in this category.
Introduced earlier this year for micro businesses facing STP reporting, MYOB Essentials Payroll includes the payroll and 'in box' parts of MYOB Essentials, along with payroll-related reports. So upgrading it to the full MYOB Essentials accounting system is a simple process. It costs from $10 a month for up to four employees.
MYOB Essentials Payroll handles income tax, payroll tax, superannuation and leave calculations. Along with Xero Payroll Only, it also appears to be one of the few products in this category that provides explicit support for the backpacker tax.
You can use it to pay employees by uploading the ABA file generated by MYOB Essentials Payroll, or do it manually, based on the pay run summary report. And you can deposit superannuation contributions via MYOB's super portal.
And once you’ve set up MYOB Essentials Payroll, STP reporting is just a matter of clicking a button when each pay run is finalised.
You can also use it to print or email payslips, and your employees can read payslips online via MYOB's YourPay employee portal, which also allows the entry of timesheet data. This portal is protected by two-factor authentication using a one-time code sent by email, or by the Google Authenticator, Microsoft Authenticator or Authy apps.
Reports available in MYOB Essentials include payroll summary, payroll details, PAYG payment summaries and pay items. Its in-tray can be used to store payroll-related documents, such as correspondence and forms. This convenient feature isn't provided by every product in this category.
You can use this cloud product for an unlimited number of employees and pay runs without charge, which is unusual for such a well-featured product. The company behind it says that’s because it earns an income from its other applications.
- create and process pay runs (including extras such as overtime or bonuses)
- send payslips
- create an ABA file to automate pay deposits (cash payments are also supported)
- allows employees to enter their personal details, or you can do it as the manager of the business
- scheduling and tracking annual leave and sick leave
- two factor authentication via Google Authenticator
- integration with Xero, MYOB, and PayPal
- Android and iOS apps.
Once you set up STP reporting in Payroller it occurs at the click of a button for each pay run.
Payroller also integrates with Beam (operated by a subsidiary of SunSuper) for superannuation payments. Using it for superannuation salary sacrifice is currently a manual process, but an automated method is on the list of features to be added.
Payroller can also report on employee details and leave balances, and provide a payroll activity summary and a payroll employee summary.
As the name suggests, a Xero Payroll Only subscription gives you access to the payroll functions of the well-known Xero cloud accounting system. You can use it to pay up to four employees in any calendar month.
Xero Payroll Only uses the full Xero accounting engine, making it easy to upgrade it to a full Xero subscription. This should also make things easier for your business's bookkeeper or accountant if they are Xero partners. Additionally, Xero Payroll Only offers all the usual Xero integrations, so you can use it with Deputy, Employment Hero, Hubdoc, Tanda and Timely.
- calculates pay and tax
- creates pay slips you can email , make available online or print
- leave management
- full set of reports, including payroll activity, superannuation and employee contact details
- makes provision for the backpacker tax.
You can use Xero Payroll Only to generate an ABA file and upload it to your internet banking platform to automate payments. Or, you can use its payroll report to manually enter bank transactions or prepare cash payments.
When a pay run is complete, a single click triggers STP reporting. The assumption is that you’re already using the ATO super portal to make contributions, and will continue to do so.
Xero Payroll Only also provides a portal and the Xero Me app for Android and iOS devices for employees to use. They can use these channels to submit timesheets and leave requests, and view and download payslips.