STP - How It Works

Single Touch Payroll (STP) is a system to replace Payment Summaries and the Payment Summary Annual Report (PSAR). Payment Summaries are now known as Income Statements.

Essentially under STP you issue an Income Statement to your employees after every pay. Then at year end you must Finalise each Income Statement - this makes it 'Tax Ready' - previously this was done via the PSAR or EMPDUPE file.

There is a lot of confusion amongst employers about how the STP system works - what needs to be reported, when, type of reports, where the data goes, how to check, how to amend, how to access etc.

Below is our brief summary about the STP system.

• What needs to be Reported
  For every payrun in your pay cycle, the employer must report 2 things via a Pay Event.
  The first are the categorised current YTD totals of amounts paid to each employee, these amounts are used to create the up to date Income Statement for each employee. The employee amounts reported in each Pay Event replace any previously reported amounts. The ATO does not aggregate or accummulate employee amounts.
  The second are the employer total gross (W1) and total PAYG (W2) for this payrun, these amounts are used to pre-fill the employer's online Activity Statements. These employer W1 and W2 amounts are accummulated for each Activity Statement reporting period (monthly or quarterly.
  
  
• When does it need to be reported
  A Pay Event must be lodged on or before the date of payment. The date of payment is governed by the Payment Date used when processing payroll.
  
  
• Type of Reports/Events
  Pay Event - as described above.
  Update Event* - must contain the categorised current YTD totals or amounts paid to each employee. An Update Event is used to correct previously reported employee YTD amounts. The employee amounts reported in each Update Event replace any previously reported amounts. The ATO does not aggregate or accummulate employee amounts.
  It can also be used to 'Finalise' employee YTD amounts at year end (or during the year if an employee ceases working).
  Despite what some might tell you, and employer cannot use an Update Event to correct employer total gross (W1) or total PAYG (W2) amounts.
  List Event* - an employer can retrieve employer total gross (W1) or total PAYG (W2) reported via Pay Events for a specified period. This can be used to understand discrepancies between employer's records and Pre-fill amounts appearing on online Activity Statements.
  Adjust Event* - allows an employer to correct any W1 or W2 errors in online Activity Statement Pre-Fill amounts caused by missed, duplicated, or incorrectly reported Pay Events.
  
  
• Where the data goes
  The STP data goes to the ATO.
  The ATO uses the employee YTD amounts to replace the existing details on the employee's Income Statement.
  The ATO accummulates the employer W1 and W2 amounts and uses to Pre-Fill the online Activity Statement.
  Some data is sent to other government organisations such as CentreLink etc.
  
  
• How to Check what you have Lodged
  As an employer, what you can check is limited to the employer W1 and W2 reported amounts. These can be checked with a List Event or can be accessed under Employees > STP Reporting on the ATO's Online Services for Business (OSB).
  Only Pay Events lodged will show a total gross (W1) and total PAYG (W2) amount. Update Events will show as $0 amounts.
  
  An employer cannot access employee YTD amounts reported, nor can an Employer check to see if an employee's Income Statement shows as Tax Ready - this concerns many employers as they cannot check these things and must rely on their STP software reports.
  
  
• How to Edit/Amend what you have Lodged
  You can amend the employee YTD amounts by lodging an Update Event.
  You can adjust the employer W1 and W2 amounts by lodging an Adjust Event.
  You can also lodge a 'Full File Replacement' to replace the most recent Pay Event in it's entirety.
  
  
• How to Access
  As an employer you can accessed limited detail about all lodged STP Events on the ATO's Online Services for Business (OSB) under Employees > STP Reporting. The information available is limited to date lodged, report type, total gross (W1) and total PAYG (W2).
  An employee can access the current Income Statement at any time by accessing the ATO via their MyGov account. The MyGov account must be linked to the ATO. This information is also available via their registered tax agent.